Harvey Blackwood - China to Tighten Investment Regulations

Harvey Blackwood - China state planner to clamp down on speculative outbound investment in certain sectors

Last week, China’s state planner released draft guidelines for Chinese firms investing overseas. According to analysts at Harvey Blackwood, the guidelines are aimed at simplifying approval procedures for agreements while firming up regulations for deals in more sensitive industries and countries.

Following a period of robust growth, China’s outgoing investment has slowed this year as regulators have clamped down on international deals, which are thought to be used to circumvent capital controls and shift funds offshore, threatening the yuan currency.

According to the website of the NDRC (National Development and Reform Commission), the draft guidelines, which were issued to the public to gain public opinion until early December, intend to protect national security, better oversight and increase support. 

Analysts at Harvey Blackwood believe that certain regulatory obstacles, such as a rule stipulating that Chinese firms investing upwards of a certain amount internationally must seek approval from the state planner, could be abolished or revised under the new code.

The revised regulations would also improve oversight on investments by international subsidiaries of Chinese firms.

Sensitive sectors and countries would merit additional oversight. Such instances would include investments involving countries that lack diplomatic ties with China or which are at war.

In 2017, China’s non-financial overseas investment dropped by more than 40 percent.

In a recent statement, Chinese regulatory authorities stated that the country will always welcome genuine outbound investment but that it had undertaken to restrict investments in property, sports clubs and entertainment industries, believing that these are riskier ventures.

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Source: Harvey Blackwood