China investment news: New regulation smooths the way to continued outbound investment

On 26 December 2017, the National Development and Reform Commission (NDRC) promulgated the Administrative Measures for the Outbound Investment of Enterprises (Regulation No.11), effective 1 March 2018. Regulation No. 11 reflects a robust move to simplify responsible Chinese outbound investments into an online record-filling system without capping the maximum investment amount. Comprising six chapters and 66 articles, Regulation No.11 replaces the 2014 Administrative Measures for Approval and Record-filling of Overseas Investment Projects (No. 9), to provide a streamlined administrative mechanism for Chinese investors going abroad. As a result, several key areas are have been simplified to pave way for faster, more efficient outbound investment administration.

Main takeaways

We have summarised the main points to consider for China outbound investment, including the scope of investment and activities, procedure and increased on-going supervision.

Scope of investment entity
Regulation No. 11 applies to both domestic entities and overseas entities controlled by domestic investor(s) whereas the previous Regulation No. 9 did not include overseas entities controlled by investor(s) or by natural persons. Additionally, indirect control including more than half of the voting rights or ability to impose influences on business operations and financial enterprises in diverse forms also falls within the scope of entities. However, investments directly made by natural persons are not subject to Regulation No. 11.

Scope of investment activities
Investment Activities primarily include but are not limited to:

  • Ownership of, right to use or equities of land
  • Exclusive right of, other equities to prospect and exploit natural resources
  • Ownership, business management right or other equities of enterprises or assets
  • New establishment, renovation or expansion of fixed assets
  • Incorporation of new enterprise or additional expansion of existing enterprises
  • Participation in equity investment funds
  • Control of enterprise or assets by means of an agreement, trust or otherwise

Management and service network system for outbound investment (Network System)
All investment approval and record filling procedures will be processed via a Network System set-up by the NDRC. Investors will be able to utilise the Network System to directly submit filling/approval applications to the NDRC or the relevant local approval authority, as well monitor approval/filling process. Overall the Network System is geared towards moving the procedures into one central online system.

Approval administration: sensitive industries
Projects related to sensitive countries or sensitive industries are subject approval administration rather than record-filling. Regulation No. 11 defines sensitive countries as any countries or regions with no China diplomatic relations, in war or civil disorder or whose foreign inbound investment is limited by international treaties or agreements concluded by China. A catalogue of sensitive industries will be published by the NDRC, including industries such as research, development, manufacturing and repair of weaponry, exploitation and utilisation of water resources across border and news media.

Record filing administration: non-sensitive investments
Investors or domestic entities directly investing in non-sensitive projects (regardless of amount) are required to be filed via the Network System. Within seven working days of accepting the submitted filling forms, the NDRC or the relevant local authorities will issue the record-filling notice or notify the investor of any violations or breaches of plans, policies or international treaties.

No Road Pass: 300 million and above investments
Direct investments of 300 million and above are no longer subject to a pre-confirmation letter issued by NDRC. Instead, Regulation No. 11 stipulates non-sensitive projects of 300 million and above made via an overseas entity controlled by a local investor shall submit a project report to the NDRC.

Filling or approval procedures to be completed before project implementation
Approval or filing notices shall be obtained prior to the implementation of the project rather than the before the closing of the project. In other words, before the investor invests assets, interests into or provides financing or guarantees for a project, therefore obtaining the notice is no longer a closing condition for the project to take effect. Furthermore, it is important to note foreign exchange administration, customs offices and other relevant departments are forbidden to proceed with formalities until the notice is issued.

Increased ongoing supervision
Upon the project completion, a project report shall be submitted within 20 working days upon the completion via the Network System. Specifically, reports shall include the circumstances of the assets or equities acquisition and the amount paid in full. The NDRC and the development and reform local authorities may also request information in relation to any given matter related to the outbound investment. Therefore, there is a stricter emphasis on the post-transaction to ensure compliance and mitigate violations.

In sum, Regulation No. 11 brings further clarity to the direction of China outbound investment. As Horizons has previously voiced, China continues to open doors to outbound investment. Here, the new regulation reflects China’s shortening of administrative timelines while encouraging mutually sustainable and beneficial investments for China and the country of investment. The record-filling process should certainly simplify and speed up the outbound investment procedures, ultimately leading to increased outbound investment confidence and growth in 2018.

If you would like more information on China outbound investment or other related issues, send us an email at, and we’ll have a Horizons professional contact you.  

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