On August 16, 2012, eight years after publishing the Tentative Measures for Administration of Approval of Foreign Invested Projects ("Tentative Measures"). the National Development and Reform Commission ("NDRC") have finally published the Draft Amendments ("Draft Amendments"), demonstrating its strengthened authority over foreign investment in China.

Under the Draft Amendments:

  • two additional types of projects will be subject to NDRC Approval:
    1. reinvestments by foreign-invested enterprises in China ("FIE Reinvestment"); and
    2. projects involving foreign invested partnerships.

Instead of merely filing with the NDRC after their establishment, RMB funds will be subject to NDRC approval prior to their establishment.

  • NDRC will be empowered to approve projects invested by foreign investors by using RMB. This, together with NDRC’s authority of approving FIE Reinvestment, authorizes NDRC to approve projects invested by RMB funds with foreign general partners. This is consistent with NDRC’s response to Shanghai Development and Reform Commission in April 2012 in respect of treating investment by an RMB fund with a foreign general partner as foreign investment.
  • NDRC will have the authority to approve projects where the investment amount is US$500 million or above, which currently requires State Council’s confirmation. Additionally, local DRCs will be authorized to approve "encouraged" or "permitted" projects with an investment amount under US$300 million (a USD 200 million above the limit under the Tentative Measures).
  • sustainable development and energy conservation are emphasized, and applicants are required to include the following additional analysis in their application:
    1. exploration and comprehensive utilization of resources; and
    2. an energy saving plan.
  • in connection with M&A of domestic enterprises by foreign investors, where the production capability and investment amount of the target is not increased, the application report may be simplified to include:
    1. basic information of the target, acquirer and the transaction;
    2. post transaction operation plan;
    3. business scope;
    4. shareholding structure;
    5. financing plan ;
    6. the use of proceeds, etc.

Additionally, M&As relating to national security should be approved under the relevant regulations. This is consistent with the joint initiative between NDRC and MOFCOM in implementing a scheme of national security review announced last year.

  • public consultation may also be conducted if the NDRC considers a project as impacting public interest. The time period of consultation is in addition to the 20 working days statutory time limit on the approval by NDRC.