New Guidelines to Further Guide and Regulate Off-Shore Investments

On August 18, the National Development and Reform Commission (NDRC), Ministry of Commerce (MOFCOM), and the People’s Bank of China (PBOC) released the Guiding Opinions to Further Guide and Regulate Off-Shore Investments. The Opinions encourage the orderly development of off-shore investment, risk minimization, and the export of domestic products, technologies and services. The Opinions also list three categories of investment in a negative list format (see below).
 
Encouraged overseas investment will be supported by tax incentives, foreign currency, insurance, and customs measures. Restricted overseas investments will be regulated on a case by case basis, while forbidden overseas investments will be “controlled strictly”.
 
Encouraged investments are generally aligned with other policies, such as the One Belt One Road Initiative, China Manufacturing 2025, and others. The industries China encourages to go abroad are in line with industries China encourages domestically. The forbidden areas are also quite straight forward with items either drawn from the proposed draft Export Control Law or industries that are illegal in China. The category of restricted investment, as explained in a readout by NDRC, targets “irrational” investment that causes capital outflows, hindering currency stability, and does not bring any real value or industry development back to China.
 
Encouraged Overseas Investment:
1)    Infrastructure to support the One Belt One Road Initiative.
2)    Export of highly-competitive products, and technology standards.
3)    Cooperation with high-end technology and manufacturing enterprises; setting up R&D centers off-shore.
4)    Petroleum, mining, and other energy resource exploration and development abroad
5)    Agriculture, fishing, farming, forestry international cooperation
6)    Investment in commercial, culture, logistics services abroad, and financial institutes to set up branch offices.
 
Restricted Overseas Investment:
1)    Investment in countries that have not set up diplomatic relations with China or in military conflict with China; investment in sensitive countries or areas that are restricted by multi-lateral or bilateral agreements or treaties.
2)    Real-estate, hotels, cinemas, entertainment business, sports clubs
3)    Setting up investment funds or platforms without a legitimate project.
4)    Investment using outdated equipment by the standards of the destination country.
5)    Projects not meeting the environmental, energy efficiency, safety standards of the destination country.
 
Forbidden Overseas Investment:
1)    Military core-technology and product exports not approved by the State
2)    Projects using technology, products that are not allowed to be exported
3)    Gambling and sex industry
4)    Investments forbidden by international treaties of which China is a signatory
5)    Investments that could endanger national interest or national security