China's State Council issued a new edition of The Catalogue of Investment Projects Subject to Governmental Approvals on October 31, 2014, less than a year after the prior edition.
The Catalogue is the key document that investors can reference to determine whether governmental approvals are required in connection with investment projects in China. The Catalogue contains specific information on the type of approvals required, and the governmental authority that is responsible for reviewing and approving each investment.1
The Catalogue was first introduced in 2004. In December 2013, the Chinese government significantly relaxed the number and types of approvals required, primarily by narrowing the scope of projects requiring approval and shifting approval authority from the central government to local governments.
On October 31, 2014, China's State Council issued a new edition of the Catalogue, which further streamlines a number of approval requirements and procedures. A summary of the most notable changes in the 2014 edition are set forth below.
- In the list of specific projects that are subject to government approval, the Catalogue has exempted 15 additional types of projects from government approval, including projects involving nonferrous metal, chemical fertilizer, steel, cement, electrolytic aluminum, flat glass and shipbuilding.2 In addition, the approval authority for 23 types of projects have been relegated from the national government to local governments. These projects include thermal power stations, pumped-storage power stations, thermoelectricity power stations, new general aviation airports, new ethane projects and the expansion of airports for both military and civil uses. Note that the above changes apply to both foreign and domestic investment projects, without reference to the investment amounts.
- For foreign investment projects that are not in the list of specific projects subject to government approval, the Catalogue has increased the investment threshold for such projects to require approval from the central government. This means that local governments have approval authority over a broader scope of investments. The total investment threshold requiring central government approval has been increased from US$300 million to US$1 billion for (i) projects in the "Encouraged Category" under the Foreign Investment Catalogue3 and (ii) other projects that require Chinese investors to hold a controlling interest. For projects in the "Restricted Category," the threshold has been increased from US$50 million to US$100 million.
- The approval requirement for outbound investment projects undertaken by Chinese investors has been greatly eliminated across the board, except for projects "involving sensitive countries or regions or sensitive industries."4 All other projects are subject only to "registration" with central or local authorities.
The changes in the 2014 Catalogue suggest that the Chinese government is accelerating the pace of deregulation for investment projects. These steps support the Chinese government's announced policy of market-oriented reforms that aim to create a level playing field for all investors seeking to do business in China, whether domestic or foreign.