Outbound investment ‘sensitive’ list to expand

2017-11-04
China Daily

The nation’s top economic regulatory body will specify sensitive industries to further curb “irrational” outbound investment, while expanding the green light for nonsensitive projects, according to a draft guideline issued on Nov 3.

An official from the National Development and Reform Commission, who asked not to be named, told China Daily the country will not loosen its grip on proper regulation of irrational and unauthentic investment behavior. The official declined to comment on whether the move represents a major policy shift in regulating outbound investment.

Analysts said the move is aimed at improving the quality of the country’s outbound investment. Previously, some enterprises invested in overseas projects that were not business-savvy or got involved in dubious overseas deals that were suspected of constituting money-laundering.

Compared with the previous version published in 2014, a major difference in the current version is the expanded list of “sensitive sectors”.

Enterprises making investment in those sectors will receive more government scrutiny and must get approval from the commission before making investments in foreign countries.

Weaponry manufacturing and industries that the government regards as irrational have been added to the list, which in the guideline compiled in 2014 already included media and water resource industries.

The commission will release a full category of which sectors will be regarded as sensitive, providing more guidance for companies planning to invest overseas, according to the draft guideline.

“The general message is that the government hopes to see more high-quality overseas investment to better promote China’s going-global initiative, rather than massive irrational overseas investment sprees,” said Bai Ming, a senior researcher at the research institute of the Ministry of Commerce. “The trend is that investment in encouraged categories, say, projects involved with the Belt and Road Initiative, will possibly be approved more quickly by regulators.”

In August, the State Council, China’s Cabinet, classified overseas investment into the three main categories of encouraged, restricted and prohibited.

Some existing restrictions on investment in nonsensitive industries will be reduced or removed in the future, according to the guideline.

For instance, enterprises investing $1 billion or more in nonsensitive industries would not need to get approval from the commission in the future; instead, they would only need to have their projects registered with the commission.

Looking ahead, the government may adjust policies based on the overall economic situation and changes in the amount of overseas direct investment, according to the NDRC official.

After years of rapid expansion, China’s outbound investment slowed this year after the government strengthened efforts to crack down on “irrational” overseas investment.

China’s nonfinancial outbound direct investment dropped by 41.9 percent year-on-year in the first three quarters, Ministry of Commerce data show.