Chinese Overseas Investment Set to Soar as The Ministry of Commerce Relaxes Investment Controls
LONDON, September 24, 2014 – The Chinese Ministry of Commerce (MOFCOM) has announced that it will no longer need to grant approval for many Chinese companies’ overseas investments. The policy, due to come into effect on 6th October 2014, will liberalise China’s outward investment model, leading to more competitive Chinese enterprises in overseas markets.
China’s outbound investment is growing quickly; in 2013 alone, the country’s outbound FDI totalled USD107.8 billion, up 23% year-on-year.
Richard Divall, Head of Cross Border Capital Markets, Colliers International commented: “This new policy is very positive news for the investment markets and, as a result, we expect to see a lot of Chinese capital flooding into the EMEA markets. China’s outbound real estate investment has accelerated consecutively since 2008, from USD69 million in 2008 to approximately USD16 billion in 2013, and in 2014, Chinese companies and individuals invested USD8.5 billion, as of 31st August. Deregulation and simplified procedures represent a significant step in China’s ‘going abroad’ strategy and a concrete practice of the Central Government’s intention to promote the market’s decisive role.
“For Chinese investors, the reduction in opportunity costs should put them in a more competitive position in the global market, by enabling them to make prompter and more accurate decisions in overseas markets. For overseas sellers, the new policy will provide additional confidence that transactions can be successfully completed, and not stalled in a lengthy and sometimes opaque approval process.
Deregulations and Simplified Procedures:
MOFCOM will no longer require outbound investments that reach a certain amount to obtain its approval (the previous threshold was USD100 million), only investments in sensitive industries or countries will need to seek approval. As a result, most investment projects will only need to file the transactions with MOFCOM. This comes after the April 2014 policy that increased the threshold for National Development and Reform Commission (NDRC) regulation, from USD30 million to USD1 billion, as well as the threshold for State Council approval, from USD200 million to USD2billion.
Previously, NDRC and MOFCOM overlapped in the regulation of outbound investment, leading to prolonged approval procedures and higher opportunity costs for Chinese companies investing overseas. With October’s new policy, the overall approval time for outbound investments (previously up to six months) is expected to be shortened and business uncertainties in association with government’s approvals should be reduced considerably