The Chinese Ministry of Commerce released the newly revised Measures for Foreign Investment Management (No. 3, 2014, hereinafter referred to as the Measures) on September 6, and recently, an official of the Department of Outward Investment and Economic Cooperation of the ministry made an interpretation of the Measures.

I. What is the background of revising and releasing the Measures for Foreign Investment Management?

A: The Ministry of Commerce released the Measures for Foreign Investment Management (No. 5, 2009, hereinafter referred to as Document No. 5) in March 2009, which has played a significant role in enhancing the facilitation level of outward investment, and standardizing and promoting outward investment. At present, China has become the third largest country of outward investment in the world, and in 2013, its outward investment was beyond US$ 100 billion.

When China’s outward investment enjoys a rapid growth, it is also faced with new situations and challenges, and many new conditions and problems spring up, including an even more complicated international investment environment, more diversified outward investment subjects and industries, failure to really realize the dominant position of enterprises in outward investment, and lacking of awareness of social responsibility and risk of some enterprises. Therefore, adjustment and optimization of the current management system are in urgent need to provide institutional guarantee for enterprises to go out.

In November 2013, the Third Plenary Session of the 18th CPC Central Committee approved the Decision on Major Issues Concerning Comprehensively Deepening Reforms (hereinafter referred to as the Decision), deciding to expand outward investment of enterprises, establish the dominant position of enterprises, and reform the examination and approval system concerning outward investment. In December 2013, the State Council issued the Catalogue of Investment Projects Approved by the Government (2013) (hereinafter referred to as the Catalogue), stipulating that, affairs concerning domestic enterprises investing outward and starting business (financial enterprises excluded), when involving sensitive countries, regions and industries, should be approved by the Ministry of Commerce; in other conditions, state-owned enterprises should be recorded by the Ministry of the Commerce, and local enterprises should be recorded by provincial governments. Therefore, the Ministry of Commerce began the revision of Document No. 5. On the basis of extensive suggestions, and following the principle of deepening reform, streamlining administration and delegating power to the lower levels, and establishing enterprises’ dominant position in outward investment, the Ministry of Commerce conducted bold reform of the current management system, and strengthened guidance and regulation for enterprises to invest outward combing the problems existing in the “going out”, and finally formed the newly revised Measures.

II. What’s the significance of revising the Measures?

A: The Measures is an important move to implement the decision of the Third Plenary Session of the 18th CPC Central Committee and the spirit of the State Council for reducing administrative examination and approval, and streamlining administration and delegating power to the lower levels, a specific reflection of transforming government functions and administrating by law, as well as an important achievement of the Ministry of Commerce to conduct the Mass Line Educational Practice of the Party and deeply rectify the work.

The Measures further defines China’s management standards for outward investment. It is a reform and optimization of the current management system, playing a driving role in establishing a comprehensive management system for outward investment which boasts scientific management, efficient supervision, perfect service, and strong guarantee.

The Measures further defines the dominant position of enterprises in outward investment, which is good for fulfilling enterprises’ rights to make their own investment decisions and promoting the facilitation process of outward investment; meanwhile, it shows the guidance of the government to encourage and support all kinds of enterprises that have competitive advantages to conduct outward investment, which contributes to the rapid growth of China’s outward investment.

The Measures is conducive to putting local commercial departments’ enthusiasm into full play, taking their advantiges of being close to grassroots and able to manage nearby, regulating their administrative behaviors, raising their administrative level and creating sound conditions for smooth progress of the overseas investment management system.

III. What are the main contents of the revised Measures?

A: It contains 39 clauses in five chapters, including general principles, filing and approval, regulation and service, legal liability and supplementary provisions. Following are the main contents.

(I) The first chapter, general principles, determines the legislative basis, relevant definitions and institutions in charge, and makes it clear for the first time that businesses will make their own decision and be responsible for their losses and gains in accordance with law and genuinely implement their role as market players in overseas investment.

(II) The chapter of filing and approval specifies the range and procedures of filing and approval as follows:

1. It clarifies the countries and industries that apply approval management. The countries with approval management include countries that have not established diplomatic relations with China and those sanctioned by the United Nations. The overseas investment filing table and overseas investment application table attached in the Measures provide a checkup of the above countries; industries with approval management include those with products and technologies restrained to export by China, and those that affect the interests of more than one country (region).

2. It narrows the approval range and reduces approval time. The Measures cancels approval requirements of making certain amounts of overseas investment and making overseas investment for special purpose. The Measures reduces the approval time by five working days. Approval on central state-owned enterprises will be decided within 20 working days and that on local enterprises within 30 working days.

3. It clarifies requirements and procedures of filing. Enterprises could finish the filing within three working days after filling the filing table genuinely and completely.

4. It stipulates that the certificate will be issued according to the final destination of overseas investment, and the contents of the certificate have been adjusted accordingly.

(III) The third chapter of regulation and service reserves partial service contents and increases requirements on enterprises’ social responsibility, environmental protection, labor force protection and corporate culture development.

(IV) The fourth chapter of legal liability increases punishment measures against enterprises’ gaining filing or approval by improper means like providing unreal material or breaching the general principles of overseas investment, and also upscales the punishment.

(V) The fifth chapter of supplementary provisions further defines central state-owned enterprises, and incorporate enterprises’ re-investment overseas into the third chapter.

IV. What are the highlights of the revised Measures compared with the previous version?

A: (I) Genuinely implement enterprises’ autonomy to make investment overseas
The measures made it clear that businesses will make its own decision and be responsible for the losses and gains in overseas investment, cancel the cause that “enterprises should gain the approval of relevant government departments before their agreement or contract concerning overseas investment comes into force”, reflecting enterprises’ subject role in overseas investment.

(II) It further streamlines administration and delegates more power to lower government departments, and upscales administration approval system reform
In accordance with the approval catalogue, the Measures changes the model of approval by the MOFCOM and provincial commercial departments into a model of “feature a filing system supplemented with approval,” narrows the range of approval to the maximize extent and upscales the facilitation of overseas investment.

III. Narrow time limits and improve the level of facilitation

The Measures further narrows the time limit of approval of starting business and investment overseas. Enterprises that need to file for overseas investment can acquire filing within three workdays as long as they submit real, complete materials in conformity with legal forms. Meanwhile, the Measures also cancels the regulation that enterprises should seek advice from domestic relevant chambers of commerce and associations when exploring and developing mineral resources overseas so as to further simplify procedures.

IV. Commercial departments at the provincial level are responsible for local enterprises’ filing so as to facilitate enterprises to do business locally

The Measures rules that commercial departments at the provincial level are responsible for record management of starting business overseas and print and issue certificates by themselves, instead of by the Ministry of Commerce uniformly in the past. This is conducive to truly playing the advantages of pressing close to grassroots and nearby management.

V. After streamlining administration and delegating power to the lower levels, what will the Ministry of Commerce focus on in terms of overseas investment management?

After the implementation of the Measures, the Ministry of Commerce and commercial departments at the provincial level will do a good job in overseas investment management in strict accordance with the Measures. Meanwhile, the Ministry of Commerce will continue to do a good job in proving service and guidance before overseas investment and strengthening guidance, supervision and guarantee during and after overseas investment according to the unified deployment of the Party Central Committee and the State Council on deepening the system reform of the administrative examination and approval and the transformation of government functions.

Firstly, macroscopic coordinated plans should be strengthened. A five-year plan on overseas investment and cooperation should be released, layout research on the “going abroad” strategy should be intensified and plans of overseas investment and cooperation in key countries and industries should be compiled and implemented so as to provide macro-guidance for enterprises.

Secondly, legal construction of overseas investment should be promoted. Release of Overseas Investment Regulations and related supporting policies should be accelerated, enterprises’ dominant roles in overseas investment should be guaranteed, and “going abroad” policy and the system of service assurance and risk control should be built so as to promote rapid and sound development of Chinese overseas investment.

Thirdly, public service and guarantee should be intensified. Guide for Countries and Regions on Overseas Investment and Cooperation, the annual development report on overseas investment and cooperation and country-based industrial guidance should be updated and released to help enterprises know the investment environment of host countries (regions), information service system for foreign investment and cooperation should be improved to provide such information as investment opportunities, investment barriers and risk warning for enterprises, bilateral and multilateral economic and trade cooperation mechanism should be established and improved, the roles of service and guide of embassies, consulates and business institutions in foreign countries should be played to protect the legitimate interests of Chinese enterprises in foreign countries.

Fourthly, statistical monitoring should be improved. The statistics system of overseas investment should be continuously improved, data collection, integration and analysis should be strengthened, communication and cooperation mechanism of overseas investment statistics with major investment host countries should be built so as to provide data support for macro management and decisions.

Fifthly, guidance and regulation of overseas investment for enterprises should be intensified. Efforts should be made to urge enterprises to abide by domestic and overseas laws and regulations, respect local customs, fulfill social responsibilities, do a good job in such areas as environment and labor protection, staff training and the construction of enterprise culture, promote the integration with local areas, support the development of chambers of commerce of Chinese enterprises in foreign countries and play their roles of serving and standardizing Chinese enterprises overseas.