Beijing to ease rules to spur overseas investments

Private firms likely to boost overseas presence, especially in resources sector, as deals below US$1b will be exempted from approval from May

PUBLISHED : Saturday, 12 April, 2014, 12:59am
UPDATED : Saturday, 12 April, 2014, 12:59am

Beijing will ease restrictions on overseas investments and scrap the need for approval on deals below US$1 billion starting next month, the country's top economic planner said in a statement.

Investments below US$1 billion would need only to be registered from May 8, the National Development and Reform Commission said in new rules published on its website late on Thursday.

"Many private companies are likely to increase their overseas investments, particularly in the resources area as the state had been adopting a restrictive attitude to such investments," said Yuan Gangming, a research fellow at Tsinghua University's Centre for China in the World Economy.

The relaxation of the rules is taking place as Beijing pushes its companies to expand outside the country and diversify investments for its US$4 trillion foreign exchange reserves.

Lengthy approval procedures, which can take months, have long been a headache for local companies seeking to expand overseas. Many projects were required to get approval from the NDRC branches at city and provincial levels. The new rules capped the approval time at 30 days.

Yuan said setting the threshold at US$1 billion "shows the leadership's determination" to encourage companies to take the leap. "It's quite a large figure," he said.

Another impact of the move would be on the foreign exchange reserves kept by the mainland.

"The new regulations would also help slow the growth of China's foreign exchange reserves as many enterprises can have more flexibility to invest directly overseas without having to transfer the money back to the country," Sun Lijian, an economics professor with Fudan University, told the South China Morning Post.

The decision is also connected with reforms being carried out by Beijing in the financial system.

"Such policies would pave the way for the mainland's full opening of the capital account and reforms in the exchange rate system," Sun said.

Under the new regulations, deals worth more than US$2 billion will still need the approval of the State Council.

"Many of our enterprises lack talent and expertise in global operations," a spokesperson with the NDRC said, adding that there were some companies that could not produce the amount they would invest and this would only "harm the reputation of Chinese enterprises in global markets".

The new rules did not apply to investment projects in "sensitive countries, regions or sectors", said the commission.

China's non-financial outbound foreign direct investment rose 17 per cent to US$90.2 billion last year, Ministry of Commerce data showed.