China's NDRC Solicits Opinions for Enterprise Outbound Investment Regulations

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On November 3, 2017, the National Development and Reform Commission (“NDRC”) released a draft of the Administrative Measures of Enterprise Outbound Investment (“the Draft”) for public opinion.


The currently effective regulation concerning outbound investment is the Measures for the Administration of Confirmation and Recordation of Overseas Investment Projects. It was issued by the NDRC in 2014, and it has played an important role by providing basic system for the outbound investment management. In order to further fulfill the needs of outbound investment, the
NDRC formulated the Draft based on the previous management experience and practice.

Key points

According to the Draft, key points as follows are worthy of attention:

Defining meaning and scope of outbound investment

The Draft defines outbound investment as investment activities that obtain outbound ownership, controlling right, operation and management right as well as other relevant right and interest, through investing assets, rights or interest or providing financing, guarantees and so on, by enterprise within China or an overseas enterprise controlled thereby.

Further, the Draft specifies that the investment activities include circumstances, but not limited to, obtaining overseas land rights and interests; obtaining overseas natural resource exploring right, development concession; obtaining overseas infrastructure ownership, operating right; obtaining overseas enterprise or asset ownership, operating right; establishing or expanding overseas fixed assets; establishing new overseas enterprise or adding investment to the existed overseas enterprise; establishing or participating equity into overseas equity investment fund; controlling overseas enterprise or assets via agreement, trust and so on.

Enhancing outbound investment guide and service

The Draft adds a whole new chapter titled “Outbound Investment Guide and Service” (charter 2) right after the first chapter “General Principle”, in order to optimize its service to the enterprise. According to the Draft, the NDRC will provide general guide and information service by issuing data, information and so on relating to outbound investment, optimize investment environment by participating in the making of international investment rules, and protect interests by promoting the establishment of overseas interest safety protection system. The investing enterprises may also consult the NDRC with respect to relevant policy and information, reflect issues and problems, and make comments and suggestions.

Approval and recordal of outbound investment project

According to the Draft, the outbound investment projects can be divided into sensitive projects which must be approved by the NDRC; and non-sensitive projects which requires recordal at the NDRC or local NDRC department, depending on whether the investing enterprise is center-managed enterprise or whether the investment amount exceeds 300 million USD by a local enterprise. In other words, the NDRC will be responsible for the approval of sensitive projects and the recordal of all the non-sensitive projects by the center-managed enterprise or the non-sensitive projects exceeding 300 million USD by a local enterprise.

The Draft states that the definition of the sensitive projects as the projects involving sensitive countries and regions or sensitive industries. Among them, “the sensitive countries and regions” refers to countries and regions that have not establish diplomatic relationship with China; in war or riots; need restriction on investment in accordance with international agreement or convention participated by China; and so on. Furthermore, “the sensitive industries” refers to research, manufacturing and maintenance of weapon equipment; exploring and use of cross-border water resource; news and media; as well as those needs to be restricted on outbound investment in accordance with Chinese macro control policy. The NDRC will issue a sensitive industry list.

Procedure of approval/recordal

The Draft proposes that the NDRC will establish a national outbound investment online management and service platform (“the platform”). Thus, most of the outbound management, including but not limited to, general guidance, information service, approval and recordal, supervision and monitor and so on, can be carried out on the Platform, which will greatly enhance the convenience and transparency of the outbound investment management and service. Nevertheless, in case of involvement of national secret or matters that not suitable for using the Platform, the investing enterprise may also submit in paper material.

According to a statement concerning the Draft issued by the NDRC, the Draft has proposed following measurements to streamline the administration:

 Eliminating the information reporting system. Currently, with respect to overseas acquisition or bidding project that with Chinese investment exceeding 300 million USD, the investing enterprises must send a project information report to the NDRC prior to any substantial work and obtain a confirmation letter from the NDRC. The Draft proposes to eliminate this step, which is considered to simplify the prior management and reduce the institutional transaction cost.

 Simplifying approval/recordal procedure. In accordance with the Draft, for projects that invested by local enterprise and required to be approved or recorded at the NDRC, such local enterprise will submit relevant application directly to the NDRC; other than sending them to the local NDRC department first, then to the NDRC by the said local department as the current practice does.

 Loosening the time bottom line of approval/recordal. The Draft proposes that the project approval document or recordal notice must be obtained by the investing enterprises prior to the implementation of the project; whereas the current law requires that such documents must be obtained prior to the signing of final binding legal documents. The Draft further specifies that “prior to the implementation of the project” refers to the time prior to investing asset/interest (excluding upfront charges) or providing financing/guarantee by the investing enterprise or the overseas enterprise controlled thereby. Thus, the Draft delays the final time bottom line to obtain the necessary approval/recordal document.

The Draft also states that the effective term of such approval document or recordal notice is two years. In case the investing enterprise does not obtain the said document, departments, such as foreign exchange, customs will not handle the relevant procedure, nor the financial institution handling the relevant fund settlement and financing.

Supervising and managing the outbound investment

Apart from the new chapter 2 mentioned above, the Draft also incorporates another new chapter titled “Outbound Investment Supervision and Management” as chapter 4. In accordance with the Draft, it proposes to establish a cooperative supervision mechanism between the NDRC and other relevant government department at the same level. Such mechanism will used to supervise the outbound investment and punish any violation by methods, such as online monitoring, interview and letter inquiry, selective examination and confirmation and so on.

In addition, the Draft also provides several report systems, in order to enhance the full supervision of the outbound investment and better protect national interest and national security. Those proposed report systems include:

 Report of large amount non-sensitive project that does not need approval/recordal, which applies to the non-sensitive project with Chinese investment amount exceeding 300 million USD;

 Report of significant adverse circumstance, which may include circumstances, such as significant casualties of delegated personnel, major loss of overseas assets, damage to diplomatic relationship between China and other counties and so on;

 Report of project completion, which shall be submitted within 20 working days after the completion of the project. The completion herein refers to circumstances such as completion of construction engineering, settlement of invested equity or assets, expenditure completed of the Chinese investment and so on;

 Report and inquiry of significant matter, which provides that the NDRC and its provincial level departments may issue inquiry letter with respect to significant matter during the outbound investment, and the investing enterprises shall submit written reply. However, it does not specify the definition nor the scope of the significant matter.

Among them, the first three kinds of reports can be submitted online through the Platform mentioned above. Also, the Draft provides that the NDRC and its provincial level department may issue risk alert to the investing enterprises or relevant interest parties as reference.


In order to better manage the outbound investment activities, the Draft lists multiple behaviors that constituting violation to the approval/recordal applying provisions, such as splitting the project intentionally, false application, fraud, bribery, failure to file for approval/recordal or the change thereof, failure to report, unfair competition, threatening or damaging national interest or security, illegally providing financing and so on. The punishment for those violations varies from warning, rectification within time limit to criminal liability in case that it violates the criminal law.

It is also worth of noticing that the NDRC will establish an outbound investment violation record, which will be published and updated any violation of an enterprise and the punishment thereto. Furthermore, such information will also be incorporated into the national enterprise credit information publishing system for publishing.


It can be seen that, comparing to the current regulation (the Measures for the Administration of Confirmation and Recordation of Overseas Investment Projects), the Draft simplifies some procedures by eliminating the information reporting system, loosening the time bottom line and so on for the purpose of easing enterprise’s outbound investment. Furthermore, the establishment of the online Platform as well as the newly proposed guide and service chapter will also helpful to enhance the convenience and transparency of the investing enterprises. On the other hand, the Draft enhances its management to the outbound investment by incorporating new report systems and specifying various liabilities. The opinion solicitation for the Draft will be due on December 3, 2016.

Fei Dang is a Senior Associate in the MMLC Group.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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