On 14 February 2011, the National Development and Reform Commission (the NDRC) of China issued the Circular on Doing a Good Job in Delegating the Examination and Approval Power for the Outbound Investment Projects (the Circular), under which the NDRC delegates power to approve outbound investments within certain thresholds to its provincial counterparts (the Provincial Authorities). The Circular came into effect on its issuance date.
Delegated Approval Power
According to the Circular, the NDRC delegates its power to approve the following projects to the Provincial Authorities:
- resources development projects in which the Chinese party's investment amount is less than US$300 million; and
- other projects in which the Chinese party's investment amount is less than US$100 million.
Further, investments in such projects by enterprises under the administration of the Central Government will be exempt even from the Provincial Authorities' approvals. Instead, such enterprises may make such investments provided they file such investments with the NDRC.
Filing with the NDRC
To monitor the Provincial Authorities' approvals, the Circular requires that before they issue any approval for the following projects, the Provincial Authorities must file information relating to such projects with the NDRC:
- resources development projects in which the Chinese party's investment amount is more than US$30 million but less than US$300 million; and
- other projects in which the Chinese party's investment amount is more than US$10 million but less than US$100 million.
The NDRC will complete such filing within five business days.
Under the Circular, the following outbound investments must be approved by the NDRC or the State Council irrespective of the Chinese party's investment amount:
- investments in countries which have not established diplomatic relations with China, or are subject to any international sanction, or involved in war or disturbance; and
- investments in special or sensitive industries, e.g., basic telecommunications, development and utilization of cross-border water resources, large-scale land development, main power grid, news and media, and so forth.
To facilitate Chinese companies' outbound investments, Chinese legal regime in this respect continues to evolve. Recent news report indicates that the NDRC is also working on a draft outbound investment law. In addition, the State Council plans to establish a new department to supervise outbound investments by state-owned enterprises, and such new department would be similar in stature to the State-owned Assets Supervision and Administration Commission.