Domestic regulation of overseas M&A

By Lin Zhong, EY Chen & Co. Law Firm

The relevant departments of the State Council have established a legal framework for outbound investment. The main rules include the Ministry of Commerce’s (MOFCOM) Administrative Measures for Outbound Investment, the National Development and Reform Commission’s (NDRC) Administrative Measures for Approval and Record-filing on Overseas Investment Projects, and various other regulations and notifications on foreign exchange control and the assessment and management of state-owned assets. Chinese regulators have introduced a series of new policies to support the rapid expansion of overseas mergers and acquisitions (M&A).

Lin Zhong Partner  EY Chen & Co. Law Firm
Lin Zhong
EY Chen & Co. Law Firm

Emphasis on the record-filing system. According to provisions of the NDRC and MOFCOM, an outbound Chinese investment of US$2 billion or above and involving any sensitive country, region or industry is subject to the approval of the State Council. Other overseas investment projects are subject to the approval of authorities at different levels, based on the nature of the investment and its amount (see Table 1). The table shows that in most cases, only record filing is required, and the approval applies to some exceptional circumstances only.

Information reporting system. According to the administrative measures of the NDRC, for an overseas acquisition or bidding project in which the Chinese party invests US$300 million or above, the Chinese investor should, before carrying out substantive work with a foreign party, submit an information report to the NDRC, which will issue a confirmation letter if the project conforms to national outbound investment policies. To streamline administration and delegate power to the lower levels, the NDRC issued the Decision on the Amendment of Administrative Measures for Approval and Record-filing on Overseas Investment Projects in April 2016, and amended the following systems: (1) delete provisions relating to “if the project conforms to the national outbound investment policies”; and (2) change the “confirmation letter” to “letter of acknowledgement”. If adopted, the amendments will facilitate outbound investment.

In order to prevent irrational investment or false outbound transactions, the regulators strengthened reviews of outbound investment. The NDRC issued a Notice on the Adjustment of the Format of Information Report of Overseas Acquisitions or Bidding Projects in December 2016 to improve relevant provisions. The latest audited financial statements and due diligence report of the investor have been added to the contents of required attachments.

Foreign exchange and renminbi cross-border payment. After the domestic institution obtains approval from, or completes the registration with, the competent authorities for its outbound direct investment, the bank must directly review and handle the foreign exchange registration, and the State Administration of Foreign Exchange (SAFE) and its branches must indirectly regulate the foreign exchange registration of direct investment through banks. In recent years, in order to support enterprises going abroad, China simplified foreign exchange procedures and introduced the following measures to support renminbi cross-border payments:

  1. Cross-border renminbi business is expanded to overseas direct investment. According to the Administrative Measures for the Pilot Renminbi Settlement of Overseas Direct Investments of the Peoples Bank of China (PBC), the enterprises may proceed with inward and outward remittance of renminbi with an approval certificate or document issued by competent authorities of overseas direct investment, including outward remittance of renminbi for overseas direct investment, outward remittance of renminbi upfront expenses, capital increase, capital decrease, share transfer and liquidation of overseas investment enterprises, etc.
  2. Further facilitation of procedures for cross-border renminbi business. In July 2013, the PBC promulgated the Notice of the Peoples Bank of China on Simplifying the Procedures for Cross-border Renminbi Business and Improving the Relevant Policies. In terms of overseas lending in renminbi by domestic non-financial institutions, domestic non-financial institutions may apply to domestic banks for the settlement of overseas lending in renminbi. A domestic non-financial institution that has an equity relationship or is ultimately controlled by the same parent company, and where the function of regional headquarters or investment management is exercised by a member, may adopt renminbi cash pooling to apply to the domestic banks for settlement of overseas lending in renminbi cash pooling.
  3. Simplification of foreign exchange procedures. According the SAFE Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment, since 1 June 2015, foreign exchange registration approval under the overseas direct investment of domestic enterprises was cancelled. Instead, banks should directly examine and handle foreign exchange registration through the SAFE’s capital project information system. Meanwhile, the SAFE regulates foreign exchange registration after the banks handle foreign exchange registration under overseas direct investment, simplifying foreign exchange procedures.

The PBC also issued a Notice on Further Clarification of Related Matters Concerning Overseas Lending in Renminbi by Domestic Enterprises on 29 November 2016 in response to the recent devaluation of renminbi, and other changes in the domestic and foreign economic situation. It stipulates that domestic lenders should meet requirements concerning the time of establishment, equity relationships, business scale, source of funds, interest rates, authenticity and compliance of the project.

In addition, state-owned enterprises should comply with the relevant provisions of state-owned assets management when they carry out overseas M&A. And the listed companies must also follow the special rules concerning corporate governance, major assets restructuring and information disclosure of listed companies when they carry out overseas M&A.









涉及敏感国家和地区、敏感行业的境外投资项目不分限额 Outbound investment involving sensitive countries and regions or sensitive industries, regardless of the limit of investment





中央企业的境外投资项目 Outbound investment launched by central enterprises





中方投资额三亿美元或以上由地方企业实施的项目 Outbound investment of US$300 million or above that are launched by local enterprises





中方投资额三亿美元以下由地方企业实施的项目Outbound investment of less than US$300 million that are launched by local enterprises




Provincial development and reform commissions/provincial departments of commerce

Lin Zhong is a partner at EY Chen & Co. Law Firm

EY Chen & Co


上海环球金融中心51楼 邮编:200120

51/F, Shanghai World Financial Center

100 Century Avenue, Pudong New District

Shanghai 200120, China

电话 Tel: +86 21 6881 5499

传真 Fax: +86 21 6881 7393

电子信箱 E-mail: