China tightens oversight of firms operating overseas

Aim is to prevent potential tax fraud, money laundering, plus illegal financing and activities, says economic planning agency

PUBLISHED : Wednesday, 29 November, 2017, 12:21pm
UPDATED : Wednesday, 29 November, 2017, 7:12pm

China’s state planner has issued guidelines for monitoring the overseas activities of Chinese firms and individuals to prevent tax fraud, money laundering, illegal financing and activities damaging to the country’s reputation.

The National Development and Reform Commission warned in a statement on Tuesday that the government would record and tally instances of laws and regulations broken in China or abroad and offenders would be punished.

The plan is part of efforts to regulate firms’ overseas investments and business activities as China’s influence in the global economy grows, especially through its Belt and Road trade initiative.

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As well as illegal activities, the guidelines specifically say actions that “violate international conventions and United Nations resolutions, or that disrupt foreign economic cooperation, adversely impact the Belt and Road initiative, or harm China’s reputation”, would be recorded.

The guidelines also focus on monitoring cross-border capital flows by insisting overseas deals are reasonable and disclosures are accurate.

China clamped down on capital outflows last year after its foreign currency reserves fell by nearly US$1 trillion and the authorities defended the yuan against depreciation.

Companies or individuals that break rules will be penalised in various ways. The authorities could reject their applications for overseas investments and foreign exchange purchases, restrict access to government subsidies and refuse to sell state land, the commission said.

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Records of infractions will be available publicly through the government’s website, the notice said. No timetable for implementing the system was given.

The authorities responsible for vetting applications to set up banks or acquire stakes in financial firms will be able to refer to the records before granting approval.

The guidelines were jointly issued by 28 government departments on Tuesday.