New rules may further relax overseas investment restrictions

By Zhang Jida and Owen Yang, DaHui Lawyers

In the previous issue, we introduced the Measures for the Administration of the Approval and Record-filing of Overseas Investment Projects and related legislation. In this issue, we continue our introduction on the National Development and Reform Commission’s (NDRC) latest updates to the legislation with respect to overseas investment by domestic enterprises.

On 23 July, the State Council circulated for comment the NDRC’s Draft Regulations on the Administration of Government Approval and Record-filing of Investment Projects. Compared with the aforesaid measures, the draft further reduced restrictions on overseas investment by domestic enterprises, reflecting the overall trend of relaxing restrictions for Chinese investment overseas. The main provisions of the draft are summarized below.

Zhang Jida Partner DaHui Lawyers Beijing
Zhang Jida
DaHui Lawyers

Methods and procedures

Scope. The draft continued the provisions set out in the measures on the scope of approval and for record-filing. Domestic enterprises will still need to undertake the record-filing process for their overseas investments, and must seek approval for overseas investments involving sensitive countries and regions or sensitive industries.

Approval process. For overseas investment projects requiring approval, the application process set out in the draft is also basically the same as that set out in the measures. Local enterprises must apply to the provincial-level development and reform commissions at their place of registration, and the provincial-level commission will submit the application with its review to the NDRC.

Separately, central enterprises must apply to the NDRC directly via their group company or head office. The NDRC must approve the application, or submit the application with its review to the State Council for approval.

Filing process. The draft indicates that filing is not simply a procedural post-filing process but a pre-filing process that must be completed prior to the implementation of the project. Nevertheless, the filing process is much more convenient than the approval process. In particular, in a filing process, the approval procedures – application, acceptance, assessment and comments – are no longer required. Companies may simply file their projects with the national overseas investment project filing network.

Requirements. The draft removed two requirements for approval and filing present in the measures. The first is satisfying the relevant state rules on capital item management, the second is the capacity for investment of project investment entities. It retained the requirements that the projects comply with national laws and regulations, industrial policies and overseas investment policies, and not injure state sovereignty, security or public interest.

While it appears that the examination standards set forth in the draft have been slightly relaxed compared with the measures, development and reform commissions are still entitled to significant discretion with respect to the granting approval or filing.

Approval documentation. The draft also cancelled the following appendix requirements for approval applications that had been required under the measures:

  • Documentation on the assets, operation and credit rating of the investment entities and foreign parties;
  • The letter of intent on financing issued by a bank; and
  • The audit report, asset evaluation report, confirmation letter or other third-party documents that may evidence the value of relevant equity interests, provided if the investors contributed capital in value securities, type, intellectual property or technology, equity, claims or other equity interests.

Filing Procedures. The draft stipulates that the project filing authorities (NDRC and the local development and reform commissions) will issue the filing notice within five working days from receipt of the filing application, provided the record-filing requirements are met. The measures did not stipulate a time limit for filing with the local commissions. Rather, it merely set out that the time limit for the NDRC to file is seven working days.

Owen Yang Partner DaHui Lawyers Beijing
Owen Yang
DaHui Lawyers

Liability and reporting

Liability. The draft strengthened the regulatory and legal responsibilities of authorities at a number of levels for approval and filing matters. The draft also stipulates that companies may be subject to fines of 0.1-0.5% of the total project investment amount in the event that the project is approved or filed by unlawful means such as using deception or bribery. Criminal conduct will be investigated where an offence occurs.

Project data reporting. The draft does not touch upon the maintenance or abrogation of the controversial project data reporting regime that had been included in the measures, as discussed in the previous column. Whether the reporting regime will be maintained requires further monitoring.

Connection with existing rules. The draft does not specify whether the measures will be maintained or abrogated after the draft is adopted. The measures include many specific provisions, such as the definition of sensitive countries and regions as well as sensitive industries, therefore it is possible that the measures will continue to remain valid after the adoption of the draft.


If this draft is adopted, it will mean that the NDRC will relax the threshold of approval and simplify the procedures required to obtain approval or file investment projects. This reflects the government’s gradual relaxation of regulation on overseas investment, providing discretion on investment areas to enterprises and recognizing the market’s role as the decisive factor in resource allocation.

However, it should also be noted that the procedure to adopt the new filing or approval measures set out in the draft will take some time. And, more importantly, complete reform of the system is still a way off. The draft does not provide for public appeals on the reform measures, such as the abrogation of the project data reporting system. It also does not provide for further relaxations, such as moving the filing time for investment projects to post-execution from pre-execution.

Zhang Jida and Owen Yang are partners in the Beijing office of DaHui Lawyers

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