China outbound investment: a procedural overview

In 2017, the Chinese government issued several regulative measures to safeguard the rapid growth of China outbound investment. Specifically, the Administrative Measures for Outbound Investment (referred to as Measures), issued by the National Development and Reform Commission, forwards provisions for outbound investment entities, supervision methods and improving outbound investment supervision systems.

As a result, China-based companies looking to go abroad should thoroughly understand the new reforms to ensure proper preparation. This article is a comprehensive guide to outbound investment approval procedures; it covers aspects such as which government bodies examine and approve outbound investment applications, which projects are subject to approval and which require administrative filing.

Procedural overview
Generally, Chinese outbound investments require examination by two government bodies: the National Development and Reform Commission or Local Development and Reform Commission (referred to as Development and Reform Commission) and the Ministry of Commerce or Local Commerce Department (referred to as Commerce Department). Upon approval, entities may proceed with foreign exchange remittance of foreign direct investment via a bank. State-owned enterprises shall be pre-approved by the State Asset Management Department, prior to the relevant state approval.

The step-by-step approval procedure is as follows:

Table 1
1 2 3 4 5 6

For state-owned enterprise SASAC-approval/filing.


Remittance of pre-project expense [if any].

Development & Reform Commission Bank/Foreign Exchange Bureau

Signed transaction documentation, i.e., acquisition, capital increase, investment contract.

Parties of Transaction

NDRC approval (filing, approval, approval report).

NDRC, Provincial NDRC

Minister of Commerce Department  approval (filing, approval, approval report).

MOC, Provincial MOC

Foreign exchange remittance.


Pre-approval: State-owned Asset Supervision and Admission Commission (SASAC)
Applicable to state-owned enterprises

Approval procedure
On 7 January 2017, the SASAC promulgated the Measures for the Supervision and Administration of Overseas Investments by Central Enterprises (referred to as Measures No. 35) for state-funded enterprises. Primarily the Measures provision a negative list and an annual plan for outbound investment guidance for state-funded enterprises looking to invest aboard. Specifically, investment projects within the annual plan shall proceed via administrative filing; projects outside the annual plan or within the negative list’s special supervision category shall proceed via SASAC approval; prohibited projects are forbidden.

Table 2
Outbound investment Category Approval procedure
Within Negative List Prohibited Prohibited
Special regulation SASAC approval
Outside Negative List Within annual plan of outbound investments
Outside annual investments plan
Inside annual outbound investment plan Administrative filing


Required documentation
Investment projects subject to approval are required to submit the following documents:

  • Investment implementation report
  • Relevant decision-making documents for the enterprise
  • Feasibility report (due diligence)
  • Financing scheme
  • Risk presentation and control management report
  • Other requisite documents

Key takeaways

1—State-owned enterprises to develop Negative List
On the basis of the SASAC issued Negative List and the actualities of state-owned enterprises, state-owned enterprises shall develop a more stringent and specific negative list of outbound investment projects.

 2—Annual investment plans to include proposed outbound investments
In line with each State-owned enterprise’s international operations, State-owned enterprises shall include an annual outbound investment plan within the annual investment plan. In this case, an investment project is re-evaluated, and the annual investment plan is readjusted; the adjustments shall be submitted to the SASAC.

3—Projects outside the principle business subject to stricter controls
No state-owned enterprises shall engage in investments outside of the principal business. Under special circumstances, other businesses are required to be invested; the enterprise is subject to the confirmation and examination of SASAC. Investment execution shall be done in cooperation with other enterprises within the business sector of the investment.

4—Specialist third parties to conduct risk evaluations
Any extraordinary and large outbound investment project is subject to a pre-investment risk evaluation system. A qualified third-party consulting institution shall be entrusted to conduct comprehensive risk evaluation of the politics, economy, society, culture, market, laws and policies of the host country (region). The Board of Directors of Central Enterprises shall green-light large outbound investments accordingly to the company’s Articles of Association and investment management regulations.

Referenced laws and regulations
Measures for the Supervision and Administration of Overseas Investments by Central Enterprises (SASAC Decree No. 34, 2017); Measures for the Supervision and Administration of Investments by Central Enterprises (SASAC Decree No. 35, 2017)

National Development and Reform Commission

Approval procedure
In 2017, the NDRC issued Order No.11 Administrative Measures for the Outbound Investment of Enterprise (Measures No. 11) to target management and integration of outbound investment. Under Measures No. 11, the provisioned sensitive investments apply to both domestic entities and overseas entities controlled by domestic entities. Approval and filing procedures include the following:

Table 3
Direct Foreign Investment Foreign Investment via Foreign Controlled Entity
Sensitive Projects Approval Procedure
Non-Sensitive State-Owned Enterprises Large Investment Amount NCRC Filing Procedure Project Report to NDRC
Normal Investment Amount
Private Enterprises Large Investment Amount NCRC Filing Procedure Project Report to NDRC
Normal Investment Amount Provincial DRC Filing Procedure

Large investment amount refers to investment of USD 300 million or more.

Investment amount refers to the sum of assets and equities, including the currency, securities, physical objects, technologies, intellectual properties, equities and creditor’s rights, and the financing and guarantee provided for the project concerned directly by the investor and through the overseas enterprise under its control.

According to the Table 3, sensitive investments of both State-owned and private enterprises are subject to NDRC approval. Sensitive investments involve both investments in sensitive counties and regions and investments in sensitive industries.

Sensitive countries and regions include:

  • Any countries or regions with no Chinese diplomatic relations
  • War-torn or civil unrest countries or regions
  • Countries or regions whose foreign investment is limited by any international treaties or agreements concluded by China

Sensitive industries listed in NRDC’s Catalogue of Sensitive Industries for Outbound Investment (2017 Edition), include the following:

  • Development and production of weaponry and equipment
  • Development and utilisation of cross-border water resources
  • News media

Sensitive industries also include the restrictive sectors listed in Guobanfa (2017) Regulation No. 74:

  • Real estate
  • Hospitality
  • Film and cinema
  • Entertainment industry
  • Sports and recreation
  • Private equity funds or platforms established outside of China for non-concrete business projects

Approval procedure – required documents
Projects subject to NDRC approval shall submit the following documents:

  • Profile of investor
  • Investment project particulars including: project name, location of investment, context and scale, investment amount of Chinese investor
  • Analysis of the investment impact to national security and interest
  • Investor statement of investment authenticity

Key takeaways

1—Scope of outboard investments is extended
According to Regulation No. 11, outbound investment is defined as investment activities conducted by enterprises located within the territory of the People’s Republic of China (referred as ‘investor’) either directly or via through a foreign-controlled entity through rendering an investment via assets and equities, or providing finance or a guarantee obtains overseas ownership, controlling rights, business management rights and other related equities.

From this, the extension comprehensively covers all investment modes and includes financial and non-financial companies, direct foreign investments of domestic entities and foreign re-investments of an overseas company controlled by a domestic entity, direct asset investment, financing, guarantee, ownership and business management rights.

2—NDRC approval is a pre-requisite condition
NDRC approval is a pre-requisite condition before progressing to formalities with other related administrative formalities. The foreign exchange administration, customs offices and other relevant departments shall not proceed with formalities. Additionally, no financial funding or financial business shall be advanced by financial companies.

3—Post investment report
Outbound investment project subject to NDRC approval shall submit a project report through the Network System within 20 working days upon completion.

Referenced laws and regulation
Administrative Measures for Outbound Investment of Enterprises, NDRC Regulation No. 11, 2017; Catalogue of Sensitive Industries for Outbound Investment (2018 Edition)

Ministry of Commerce (MOFCOM)

Approval procedure
On the 18 January 2018, the MOFCOM, People’s Bank of China, State-owned Assets Supervision and Administration Commission, China Banking Regulatory Commission, China Securities Regulatory Commission, China Insurance Regulatory Commission and State Administration of Foreign Exchange issued a joint Circular on Interim Measures for the Reporting of Outbound Investments Subject to Record-filing or Approval (Circular [2018] No. 24).

Under the Circular, the MOFCOM will strengthen the exchange of information between departments while the previous outbound investment filing and division of responsibilities remains unchanged from the previous. Therefore, the Administrative Measures for Outbound Investment Management issued by the MOFCOM is still applicable, although it may be subject to future changes. Under the 2014 Measure, non-financial enterprises shall follow the below procedures.

  • For all approval investment of central enterprises, central enterprises shall apply to the MOFCOM or through to local provincial competent commerce department to MOFCOM.
  • For all filling investment of central enterprises, central enterprises shall apply to the MOFCOM or through to local provincial competent commerce department to MOFCOM.
  • The overseas reinvestment of an overseas enterprise invested in by an enterprise shall be reported to the relevant department in charge of commerce by the enterprise after the overseas legal procedure is completed.

It is important to note, the NDRC and MOFCOM differentiate sensitive investments into sensitive countries and sensitive industries. Under the State Council’s Guiding Opinions on Further Guiding and Regulating the Outbound Investment Direction (Guo Ban Fa [2017] No.74) issued on 4 August 2017, three types of sensitive investments are established.

  • Outbound investment projects made in any sensitive country or region which have not established diplomatic relations with China yet is undergoing wars or is limited under a bilateral or multilateral treaty or agreement already concluded by China.
  • Outbound investment projects made in such sectors as the real estate, hospitality, film cinemas, entertainment or sports clubs
  • Private equity funds or investment platforms established outside the territory of China for non-concrete business projects.
  • Sensitive investments under Guo Ban Fa [2017] No.74 shall be approved by the competent authority regulating outbound investment.

Required Documents
Required documents for outbound investments subject to the MOFCOM approval procedure include:

  • Application – including specifications of investment circumstance, name of overseas entity, investment structure. financing, business scope, period of business operation, source of investment funds and investment specifications.
  • Outbound investment application form – downloaded from Management System, printed, completed and affixed with company seal.
  • Related contracts and agreements.
  • Related aspects involving exports of restricted products or technology restricted by the People’s Republic of China.
  • Copy of Business License.

Referenced laws and regulation
Circular of the General Office of the Ministry of Commerce on Issuing the Detailed Rules for the Regulation under the “Dual Random and One Publicity” Mode for Outbound Investment and Cooperation (for Trial Implementation)

Foreign exchange remittance   

Approval Method
Upon the approval of outbound investment authorities, companies may directly administer foreign exchange remittance formalities with a financial institution. The Circular on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies removes the following two foreign exchange procedures:

  • Administrative examination and approval procedures relating to foreign exchange registration of domestic direct investment.
  • Foreign exchange registration approval under overseas direct investment.

Instead, both foreign exchange registration under domestic and overseas direct investment are directly reviewed and administrated by banking institutions. Any foreign exchange registration of banking institutions is subject to the indirect supervision mechanisms of the State Administration of Foreign Exchange (SAFE) and related branches. Additionally, any overseas enterprises established or controlled by a domestic entity establishing or controlling a new overseas enterprise are no longer subject to foreign exchange filing formalities.

Required documents
Documents required for foreign exchange formalities include:

  • Application form for foreign exchange registration of direct foreign investment.
  • Business license or registration certificate and organisation code certificate (an outbound investment of multiple organisation shall submit each organisation’s business license or registration certificate and organisation code certificate.
  • Non-financial companies shall submit a Certificate of Overseas Investment issued by commercial authorities.

Financial institutions shall submit an investment approval document or non-objection letter issued by financial authorities.

  • If the equity of a domestic company is held by foreign investors or shareholders hold equity in overseas companies, the following supplementary documents are required.—Approval of foreign-invested enterprise certificate
    —Business license of the overseas entity

Referenced laws and regulation
Circular on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies 2015 (Hui Fa [2015] No. 13); Administrative Provisions on Foreign Exchange of the Outbound Direct Investments of Domestic Institutions (Hui Fa [2009] No.30)

Pre-project expenses

Outbound projects may involve expenses prior to project establishment, such as performance bonds, guarantee funds, agency fees, exploration fees, etc. Any foreign exchange remittances of prior expenses are required to firstly submit a filling or approval application to the development and reform department. The banking institution may only administer foreign exchange remittance upon the approval of the initial investment costs (including investment amount of the Chinese party)

Table 4
Preceding Expenses
Procedure Provisions Required Documents
1 – Domestic institutions including corporations, financial and non-financial institutions shall not remit a cumulated total of more than 3 million UDD or more than 15% of the Chinese investment amount. N/A
2 – Pre-expenses can be included in the total outbound investment amount. N/A
3 – Pre-expenses registration formalities shall be processed by banking institutions through the Capital Amount Information System. Once processed, the domestic entity can directly proceed with purchase and payment formalities at the bank institution. 1 – Application form for foreign exchange registration of direct foreign investment
4 – If the domestic institution fails to complete the examination and approval procedures for overseas direct investment within six months after the date of the outwards remittance of the pre-expenses, the domestic institution shall transfer the remaining funds of the overseas account to the original domestic foreign exchange account, from which the funds remitted from Domestic institutions may extend six months previous within reasonable reason. The account holder is required to submit an explanation letter to the banking institution for the approval, the extension period cannot surpass six months. 2 – Business license or organisation code certificate
5 – In the case, the cultivated pre-expense amount surpasses 300 million USD or more than 15% of the Chinese investment amount, the investor shall submit an explanation letter to the local foreign exchange authority of the application registration (the foreign exchange authority approves on a case by case basis). 3 – Other related documents
In the case of a domestic entity purchasing real estate for a representative branch, the following document are required.
1 – Application form foreign exchange registration of direct foreign investment
2 – Approval or filing document or registration certificate of overseas brand or representative office
3 – Overseas real-estate contract agreement
4 – Other proof of authenticity documents
5 – Other


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