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Review procedure

Foreign investment may be subject to the following review process by the PRC government authorities.

i Foreign investment review proceduresProject approval

According to the circular issued by NDRC on Effectively Implementing the Relevant Foreign Investment Work concerning Investment Project Catalogue Approved by the Government (2016 Edition), foreign investment projects will be subject to either an approval process or a record-filing process from competent government agencies. Generally, the approval process takes around 20 business days, and the projects are considered case by case, with reference to the specific circumstances of each project.

In practice, whether a foreign investment project requires the approval of NDRC, its local branches, State Council, or other competent government agencies depends on the gross investment amount, industry, circumstances of the individual project, etc. Therefore, it is prudent for a foreign investor to consult the relevant investment department of local governments before initiating the project.

Approval of the environmental protection authority

For foreign investments in construction projects and others that may cause environmental issues (such as pollution or impact on wildlife), a foreign investor must conduct an environmental impact assessment before starting the project and submit the assessment documents to the local environmental protection authority for the approval of the project. The length of the environmental impact assessment process depends on the extent of the environmental impact the project may cause.

Industrial approval by the pre-registration approval authority

Certain types of foreign investment, such as investment in the general aviation industry and tobacco monopoly production, may be subject to pre-registration approval by the relevant government authorities. These approvals must be obtained prior to the application being submitted to MOFCOM and before registration with the State Administration for Market Regulation (SAMR) or its local branch.

The approval procedures and the length of the approval process shall be subject to the different requirements of the government authorities concerned.

Approval by or filing with MOFCOM

All foreign investments included on the Negative List, including M&A transactions or the establishment of FIEs, are subject to MOFCOM approval. For foreign investment activities (including the establishment of an FIE and a change from a non-foreign-invested enterprise to an FIE by acquisition, merger or any other means) outwith the Negative List, only an online record filing on the MOFCOM website is required (the record filing process normally takes around three business days to complete).

Registration with the registration authority

For the establishment and change of an FIE, the FIE must register with SAMR or its local branches to obtain or renew its business licences. This registration normally takes 5 to 10 business days.

Post-registration filing or registration with the relevant authorities

After obtaining its business licence, an FIE must complete the filing or registration procedures (i.e., registering with the tax authorities, opening a foreign currency account and registering for social insurance) with the relevant authorities. It normally takes around 30 business days to complete all these procedures.

ii Other review proceduresNational security review

In accordance with both the National Security Law and the Security Review Notice, certain foreign investments with national security implications will be subject to a national security review. The new Cybersecurity Law also emphasises the importance of national security.

A joint committee led by MOFCOM and NDRC is responsible for security reviews. When conducting a security review, regulators will analyse the potential effects of any proposed merger or acquisition on China's national defence, economic stability, social order and key technologies, and will focus on the issue of control. M&A transactions resulting in more than 50 per cent foreign ownership or de facto control of a domestic enterprise in the sensitive sectors will attract the attention of security review regulators.

Antitrust review

MOFCOM's Anti-Monopoly Bureau will be notified about transactions in which the foreign investment is, inter alia, deemed to cause a 'concentration' under the Anti-Monopoly Law and meets the statutory turnover thresholds. Details of the thresholds can be found in the Anti-Monopoly Law and other relevant laws and regulations.

Review of foreign investment involving state-owned assets

Under the Provisional Measures for the Administration of Valuation of State-Owned Assets of Enterprises, before any assets are transferred to foreign investors, a certified asset evaluation agency must issue a valuation report providing the value of the assets. The transfer price shall not be less than 90 per cent of the valuation value unless expressly approved by the relevant authorities.

Review of foreign investment in listed companies

Based on the Measures for Strategic Investment, foreign investment in listed companies will be subject to the supervision of the securities regulatory authorities.

The above-mentioned foreign investment review procedures are general practice in accordance with PRC laws and regulations. The procedure may vary slightly depending on different factors, such as the type of foreign investment, the amount of the investment, the location of the project and the different requirements of the relevant local governmental authorities.

In addition to the above, FIEs are subject to regulations regarding annual reporting to or inspection by (if applicable) SAMR or its local branches, the administration for foreign exchange or its local branches, and other relevant government authorities once established.

iii Interface with other authoritiesDomestic interface

The approval and registration procedures of each government authority follow a general sequence with respect to the approval of a foreign investment, and inter-government and intra-government consultations are very common during the approval process. Some industrial approvals are prerequisites to approval by MOFCOM and therefore must be obtained before applying for MOFCOM approval. The PRC government has started to relax the precondition requirements.

Foreign interface

It is very rare for the PRC approval authorities to directly communicate with foreign government authorities regarding foreign investment reviews. However, in certain circumstances, application materials prepared outside China to obtain relevant approvals will be considered by PRC regulators as valid supporting documentation for a foreign investment in China.