Chinese offshore investment

China issues draft guidelines on overseas investment amid crackdown on deals

Beijing has restricted deals abroad as it tries to control the flow of cash and assets out of China

PUBLISHED : Friday, 03 November, 2017, 12:39pm
UPDATED : Friday, 03 November, 2017, 12:39pm

China’s state planner issued draft guidelines on Friday for its companies investing overseas, streamlining approval processes for deals while raising oversight for projects in sensitive sectors and countries, the government said.

After years of rapid growth, China’s outbound investment has slumped so far in 2017 as the authorities crack down on “irrational” overseas deals which are suspected of being used to bypass capital controls and move money offshore, pressuring the yuan currency.

The draft regulations, released to the public to solicit feedback until December 3, aim to improve oversight, safeguard national security and increase support, according to a post on the website of the National Development and Reform Commission.

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Some administrative hurdles, such as a rule requiring that Chinese companies investing over US$300 million overseas seek approval from the state planner, would be reduced or removed under the new rules, the post said.

At the same time, the new rules would also increase oversight on investments by overseas subsidiaries of Chinese companies, as well as for investments in sensitive sectors and countries, it said.

Sensitive projects listed in the rules include those in countries that are at war, that do not have diplomatic ties with China or where investment is restricted by China’s commitments to international treaties, resolutions or requirements.

Media organisations, weapons manufacturing, companies involved in multinational water resources exploitation or those that China’s national macro policies restrict investment in were listed as sensitive sectors.

A full list of sensitive areas would be released by the state planner in future, it said.

Punishments for companies that use dishonest measures to invest overseas, engage in unfair competition or damage national security will be increased, the rules said.

The statement said that the new draft builds on previous regulations released in 2014.

China’s non-financial outbound direct investment fell 41.9 per cent from January to September from a year earlier to US$78.03 billion.

For September alone, it plummeted 42.5 per cent on-year to US$9.31 billion, according to Reuters calculations.

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China says it continues to encourage genuine overseas deals, but has vowed to limit overseas investment in property, hotels, entertainment, sports clubs and film industries which it suspects is more speculative.

The State Council issued guidelines in mid August to curb domestic companies’ investments abroad in those and other areas.