China Eyes up the World Market

According to Vice Premier Wang, China will amend its fiscal, tax, financial and insurance policies in line with international norms, to provide its outbound investment with enhanced institutional guarantees. It will also refine laws and regulations on outbound investment, and sign pacts with relevant countries to better protect investor rights and interests and to enhance customs and labor cooperation. Relevant authorities will introduce more services to facilitate Chinese companies’ international ventures.

Until 2004, Chinese companies had to apply for central government approval to invest overseas, whatever the amount – a complicated, lengthy process. In 2004 the regulations were relaxed, but any international investments over US $10 million for non-resource projects and those involving resources over US $30 million were still subject to examination and ratification by the National Development and Reform Commission.

The threshold was further lowered in February 2011, when only outbound investments over US $100 million for non-resource projects and those involving resources over US $300 million needed to go through this procedure.

China has since continued to loosen regulations on foreign investment. Ten days after Wang Yang’s speech at the Fifth COIFAIR on December 13, the State Council, China’s cabinet, promulgated a decree to reform the investment management mechanism, stating that only overseas investments above US $1 billion, or in politically sensitive countries/regions and industries, would be subject to approval by central administrations. The rest are only required to file with the investment governing bodies of central and provincial governments. This change provides greater convenience to Chinese investors, and is also good news for countries in dire need of funding to recover from the global financial crisis.