The PRC State-owned Assets Supervision and Administration Commission ("SASAC") promulgated, in June 2011, two new rules to further regulate the outbound investments by state-owned enterprises directly administered by SASAC (the "Central SOEs") which are both effective as of 1 July 2011:

  1. Interim Measures on Supervision and Administration of Overseas State-owned Assets of Centrally Administered SOEs (the “Foreign Assets Regulatory Approach"); and
  2. Interim Measures on Administration of Overseas State-owned Property Rights of Centrally Administered SOEs (the “Overseas Property Management Approach”).

Background of the Legislation

Under the encouragement of China's Walk Out Policy, many central SOEs have strengthened their overseas investments and made great achievements.  However, in the meantime, SASAC has also realised that the supervision and administration systems are not strong enough to protect the security of its overseas state-owned assets.  As an investor and in order to set up an overseas state-owned assets supervision and administration system and for the long-term growth of its overseas subsidiaries, SASAC has promulgated these two new administrative measures.

Foreign Assets Regulatory Approach

The Foreign Assets Regulatory Approach has 7 chapters 40 articles and includes:

  1. clarifying that SASAC and centrally administered SOEs bear supervision and administration obligations to overseas state-owned assets;
  2. stating and highlighting the keys administration requirements and procedures in the proceeding of conducting overseas investments and post-investments;
  3. stating the principals in managing and operating overseas subsidiaries;
  4. stating the compulsory reporting procedures, contents and timeframes in managing and operating overseas subsidiaries; and
  5. stating the key supervision targets and requirements internally and externally. 

Under this Foreign Assets Regulatory Approach, SASAC approval/filing is required for major outbound investments conducted by centrally administered SOEs and their major subsidiaries.  This  requirement reconfirms the previous stance of SASAC.  But regretfully, the Foreign Assets Regulatory Approach still fails to offer clarity to the concepts of “major subsidiaries of central SOEs” and “major outbound investments”, which in fact gives SASAC a wide discretion.

Overseas Property Management Approach

The Overseas Property Management Approach has 20 articles and includes:

  1. setting up an overseas state-owned property rights registration and valuation management regime;
  2. detailing the approving authority, basic approving procedures, selling price, transfer measures, payment methods in transferring overseas state-owned property rights;
  3. clarifying the basic principles in managing state-owned equity interests in Red-Chip companies; and
  4. clarifying requirements and approving procedures when individual nominee shareholders are required.

Under this Overseas Property Management Approach, a centrally administered SOEs is required to effect the property right registration with SASAC, when their overseas subsidiaries (regardless directly controlled or indirectly controlled) have undergone any material corporate change (eg. capital increase, change of business scope).


Since the Reform and Opening Up Policy in the 1980's to the recent Walk Out Policy, Chinese governments at all levels are becoming more and more confident and experienced in dealing with inbound and outbound foreign investments.  We believe these two administrative measures are just a further step for Chinese government to regulate its overseas investment activities and protect its assets and properties which, once again, reflect its desire to turn itself into a modern market economy and support, protect and encourage outbound investments in order to feed its high growing domestic demands, although these two measures may cause some confusion at early stage.