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China Seeks Opinions on Outbound Investment and Foreign Investment Approval Measures 国家发改委发布《境外投资项目核准管理办法》(征求意见稿)和《外商投资项目核准管理办法》(征求意见 稿)(08/16/2012)

On August 16, 2012, the National Development and Reform Commission (“NDRC”) issued the Measures for the Administration of Verification and Approval of the Outbound Investment Projects (Draft for Comments) (“Draft Outbound Investment Measures”) and the Measures for the Administration of Verification and Approval of Foreign Investment Projects (Draft for Comments) (“Draft Foreign Investment Measures”). The NDRC solicited opinions from the public regarding the two Draft Measures. The deadline for submitting opinions was September 15, 2012.

I. Outbound Investment

1) Investment Category

According to the Draft Outbound Investment Measures, outbound investment projects are categorized into two types: resource development projects and non-resource development projects. It is noteworthy that although transportation and infrastructure projects fall within the scope of non-resource development category, verification and approval of such projects shall be subject to approval procedures of resource development category.

2) Delegation of Approval Authorities

The Draft Outbound Investment Measures create new rules pertaining to NDRC approval of investment projects with a Chinese domestic investor.  As background, the NDRC is comprised of a national-level commission and several lower-level branches on the provincial and city level. They are each responsible in different ways for varying types of investment projects.  If a Chinese investor contributes amounts that meet certain thresholds for different types of projects, then the outbound investment project must meet filing or approval requirements with the relevant branch of the NDRC. 

Specifically, resource development projects (including transportation and infrastructure projects) in which a Chinese party contributes greater than or equal to 300 million US dollars and non-resource development projects in which the Chinese investment is greater than or equal to 100 million US dollars, the project must submit to the NDRC for examination and approval. In addition, outbound investment projects in sensitive territories or industries shall be submitted to the NDRC for verification and approval regardless of the investment amount.

A middle level of investment necessitates provincial-level approval, but only requires filing with the NDRC. For an outbound investment project (including transportation and infrastructure projects) in which the Chinese  investment is greater than or equal to 30 million U.S. dollars but less than 300 million U.S. dollars in a resource development project (including transportation and infrastructure) and a non-resource development project in which the  amount given by a Chinese party is greater than or equal to 10 million US dollars but less than 100 million US dollars, shall be verified and approved by the provincial-level development and reform commission and filed with the NDRC.  It is important to note that filing must be submitted prior to the grant of provincial level approval. Within this range, central state-owned enterprises make their own decision to seek approval for their projects by the NDRC, but must always report.

Outbound investment projects (including transportation and infrastructure projects) in which a Chinese party gives less than 30 million U.S. dollars and non-resource development projects in which a Chinese party contributes less than 10 million US dollars may only seek provincial-level verification and approval.

Filing Requirements

Resource Development Projects and transportation and infrastructure projects

Non-Resource Development Projects

NDRC Approval

≥USD 300 million

≥USD 100 million

Provincial branch of the NDRC Approval + NDRC Filing

USD 30 million (included) -USD 300 million

USD 10 million (included) - USD100 million

Self-decision + NDRC Filing(Central State-OwnedEnterprises)

<300 million

<USD 100 million

Provincial branch of the NDRC Approval

<USD 30 million

<USD 10 million

3) Change of Registration

The investors shall apply to the NDRC for change of registration for the approved projects under any of the following circumstances: (1) change of the investors; (2) change of the shareholdings structure or cooperation mode of the investors; (3) change of the construction scale, the main construction items or main products; (4)change of the construction sites; (5) change of a Chinese party's investment by exceeding 20 percent or more of the approved Chinese party's investment amount; and (6) substantial change of merger or acquisition projects or equity participation projects.

4) Mandatory Requirement

Unless the outbound investment projects are approved the competent NDRC, parties to the project are not allowed to handle relevant formalities with various authorities, including the bureaus of commerce, customs, tax and foreign exchange.

II. Foreign Investment

1) Approving Authorities

The NDRC shall verify and approve foreign investment projects with more than USD 300 million in an encouraged or permitted industry, or more than USD 50 million in a restricted industry under the Catalogue of Industries for Guiding Foreign Investment. Otherwise, the project shall be subject to provincial-level verification and approval and the provincial-level branch of the NDRC shall not have the authority to transfer verification and approval of restricted projects to other sub-branches.

In the event of the capital increase, total investment shall refer to the increased amount of investment. In the case of a merger or an acquisition, total investment shall refer to the total transaction value. Security review is required to be conducted in accordance with relevant PRC laws and regulations if national security concerns are involved in the acquisition project by foreign investors.

2) Filing Requirements and Procedures

Required documents for verification by the NDRC include the following: 1) the project application report; 2) certification of incorporation, financial statements and bank reference letter of the foreign investors; 3) letter of intention on investment and board resolution on capital increase and M&A; 4) statements by the bank regarding finances; 5) environmental impact studies; 6) planning and selection of sites by the urban and rural planning authority; 7) opinion on use of land; 8) confirmation by the competent authority on the contribution with state owned assets; 9) energy evaluation report or registration form; 10) other required documents. Among the filing documents, the project application report can be simplified if the project is not for enlarging the scope of production or investment.

According to the Draft Foreign Investment Measures, if the project under verification will likely have a significant impact on public welfare, the NDRC shall take appropriate measures to solicit opinions from the public.

3) Mandatory Requirement

Unless a foreign investment project is approved by the competent NDRC, its foreign investors are not allowed to proceed with handling the relevant formalities with various authorities, including authorities of industry management, national land and resources, urban and rural planning, quality inspection, supervision authorities of safe production, and the administrations of industry and commerce. This also includes customs, tax and foreign exchange authorities.

4) Change of Registration

Investors shall file for a change of registration of approved projects under any of the following circumstances: (a) change of the construction sites; (b) a change in the investors or shareholding structure; (c) change of main construction items and main products; (d) change of the total investment exceeding 20 percent or more of the approved investment amount and (e) other circumstance required for change of registration as provided in the relevant laws and regulations as well as industry policies.

  • Measures for the Administration of Verification and Approval of the Outbound Investment Projects (Draft forComments); Measures for the Administration of Examining and Approving Foreign Investment Projects (Draft for Comments)
  • 《境外投资项目核准管理办法》和《外商投资项目暂行管理办法》(征求意见稿)
  • Issuing Authority: the National Development and Reform Commission
  • Date of Issuance: August 16, 2012 / Effective date: N/A
©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume II, Number 348
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About this Author

George Qi, Greenberg Traurig Law Firm, Shanghai, Corporate and Finance Law Attorney
Shareholder

George Qi is the Co-Managing Shareholder in the firm's Shanghai office. He practices primarily in China-related cross- border mergers and acquisitions, foreign direct investment and general corporate matters. He also has wide- ranging experience advising both U.S. and non-U.S. companies relating to internal investigations of FCPA or other regulatory violations.

Areas of Concentration

  • Corporate

  • Compliance

  • Foreign Corrupt Practices Act...

86021-6391-6633
Dawn (Dan) Zhang, Greenberg Traurig Law Firm, Shanghai, Corporate Law Attorney
Shareholder

Dawn (Dan) Zhang is Co-Managing Shareholder of the Shanghai Office and has broad experience advising clients on China-related cross-border mergers and acquisitions, restructuring, joint ventures, funds, and general corporate matters. Before joining Greenberg Traurig, Dawn practiced in other international law firms for many years and served as the PRC legal counsel for a multinational corporation, where she handled a wide variety of corporate matters for public and emerging growth companies. Dawn passed the national PRC judicial qualification examination in 1998 and is...

8621-6391-6633
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