Draft measures for the approval of inbound and outbound investment projects

Members of the public had up to 15 September 2012 to submit their comments on the draft versions of the following draft measures (Draft Measures) issued by the National Development and Reform Commission (NDRC) on 16 August 2012:

1. Administrative Measures for the Examination and Approval of Foreign Investment Projects（《外商投资项目核准管理办法》） (Approval Measures for FIP); and
2. Administrative Measures for the Examination and Approval of Overseas Investment Projects（《境外投资项目核准管理办法》）(Approval Measures for OIP).

The Draft Measures are revised from the currently effective "Interim Measures for the Administration of Examination and Approval of Foreign Investment Projects" (Interim Measures for FIP) and the "Interim Measures for the Administration of Examination and Approval of Overseas Investment Projects" (Interim Measures for OIP) respectively, both of which were promulgated in 2004, and supplemented by various NDRC notices issued thereafter.

Due to the fast growing outbound and inbound foreign investments in recent years, many new situations and problems have emerged in China, with a growing need to, on the one hand, reduce China's huge amount of foreign reserves and ease pressure on the Chinese Yuan, as well as to facilitate the domestic companies in gaining international exposure; and on the other, to optimize foreign investment structures, diversify foreign investments and create a favourable investment environment for foreign investors.

The Draft Measures are aimed to achieve the above objectives, with:

• the scope and scale of overseas investments widened, encouraging outbound investment in the transportation and infrastructure projects;
• the relevant administrative procedures simplified, removing the need for prior reporting to the NDRC for overseas acquisition and bidding projects of below US$100 million;
• the creation of a more transparent and friendly environment for foreign investments, permitting new types of foreign investments in the form of foreign-invested partnerships and projects involving capital contributions in RMB; and
• a coordinated development of outbound investments and inbound investments, with the same central approval thresholds being applicable to both outbound and inbound projects, rather than a much higher central approval threshold being applicable to inbound projects than to outbound projects as stipulated under the Interim Measures.

The Draft Measures essentially cover a series of regulations and notices released by the NDRC in recent years (including those relating to delegation of approval powers to the authorities below), and reaffirm several policies which have been implemented by the NDRC for outbound and inbound investments for several years (such as implementation of the security review system, requirement for energy conservation, etc.). The Draft Measures, if adopted, will supersede the existing Interim Measures for FIP and Interim Measures for OIP, as well as the related regulations governing the same.

It is anybody's guess as to when the Draft Measures will be formally promulgated, and whether the final versions will be substantially similar to the existing Draft Measures. Nevertheless, it is advisable for investors looking to expand their businesses in China and/or overseas to pay close attention to the development of the Draft Measures, and consider how they may strategize and expand their businesses when the Draft Measures take effect as laws governing outbound and inbound investments.