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China – Highlights Of The 2013 Catalogue Of Investment Projects Subject To Governmental Approvals.

26 February, 2014


Legal News & Analysis – Asia Pacific – China – International Trade


On the 2nd of December, 2013, the State Council of the People’s Republic of China promulgated the Catalogue of Investment Projects Subject to Governmental Approvals (2013) (hereinafter referred to as the “2013 Catalogue“), which became effective on the same day. This Catalogue eases the approval requirements for investment projects, with the aim of deepening investment policy reform and administrative verification policy reform.


Background Information


The 2013 Catalogue specifies three types of investment which require approval from, or recordal, with government authorities. Firstly, 11 main industry sectors are listed in the Catalogue, whose investment projects are subject to approval or recordal requirements. These sectors include agriculture and water conservancy, energy, transportation, information industry, raw materials, machinery manufacture, light industry, high-new technology, urban construction, social undertakings and finance. The two other types of investments that require approval or recordal are foreign invested projects and Chinese outbound investment projects.


Compared to the prior catalogue issued in 2004 (the “2004 Catalogue“), the 2013 Catalogue has eased approval requirements for all three types of investment project, with the approval requirement for certain investment projects being cancelled or replaced by a recordal requirement, and approval power for other projects being delegated to the provincial or local government authorities or vested in the respective administrative authority in charge of a certain specific industry. The major changes are outlined below:


Investment Projects In The 11 Specified Sectors


The 2004 Catalogue vested a large amount of approval power in the National Development and Reform Commission (“NDRC“) or its provincial or local offices. In the transportation industry, for example, all investment projects concerning highway bridges and tunnels which cross borders, gulf regions and navigable sections of major rivers and streams required approval from the NDRC or its provincial or local offices. The NDRC was also vested with approval powers for all investment projects involving container dedicated wharfs.


The 2013 Catalogue has substantially eased and decentralised the approval requirements, especially in the transportation industry. The threshold criteria for NDRC approval has been increased and approval powers for a substantial part of investment projects involving new-built railways, highways, independent highways’ bridges and tunnels, special berths used for coal, ore, and oil and gas and inland river shipping are now vested in the provincial or local governments. For container dedicated wharfs, which were subject to the NDRC’s approval alone, approval power is now vested in the NDRC for the coastal projects (including the lower reaches of Changjiang River commencing from Nanjing) and in the relevant provincial government for projects in other locations. Furthermore, ten approval requirements have been repealed altogether in the raw material, machinery manufacturing, and light industry sectors.


Foreign Investment Projects


Under the 2004 Catalogue, all “encouraged” and “permitted” sector foreign investment projects with a total investment amount of USD $100m or more and “restricted” sector foreign investment projects with a total investment amount of no less than USD $50m required approval from the NDRC.


The new Catalogue substantially increases the NDRC approval threshold and delegates more approval powers to provincial and local governments. Under the Catalogue, NDRC approval is now only required for “encouraged” sector projects with a total investment amount of USD $300m or more if a Chinese controlling (or relatively controlling) shareholder is required and for non-real estate “restricted” sector projects with a total investment amount of USD $50m or more. Provincial level government approval is required for “restricted” sector real estate projects and other “restricted” sector projects with a total investment amount of under USD $50m. “Encouraged” sector projects with total investment amount of under USD $300m where Chinese controlling (or relatively controlling) shareholder is required may be approved by the local government. Other “encouraged” and “permitted” sector projects are treated similarly to domestic investment in the foregoing 11 main industry sectors. The classification of projects as “encouraged”, “permitted” or “restricted” are made in accordance the “Catalogue for Guiding Foreign Investment” (amended 2011).


These changes are in line with the general devolution of approval authority for foreign investment projects in the PRC since 2004. It should be noted that these changes do not alter Ministry of Commerce (“MOFCOM“) approval requirements.


Chinese Outbound Investment Projects


Chinese investors are usually required to seek verifications from three key regulatory bodies for their outbound investments. These bodies include the NDRC, MOFCOM and the State Administration of Foreign Exchange (“SAFE“).


Approval powers of the NDRC


Under the 2004 Catalogue, all resource and exploitation project investments over USD $300 million and all non-resource project investments over USD $100m by Chinese parties must be approved by the NDRC.


The 2013 Catalogue substantially decreases the number of investment projects that require approvals from the NDRC. It abolishes the distinction between resource and non-resource projects and makes a distinction between “special” and “general” projects instead. Approvals by the NDRC are limited to special projects which invest in sensitive countries, sensitive regions and sensitive industries and those involving USD $1bn or more. All other investments by centrally-administered enterprises and investments involving at least USD $300m by local enterprises are only required to make a recordal filing with the NDRC. Similarly, all the projects not specified in the Catalogue are only subject to recordal filings.


Verification powers of MOFCOM


Under the 2004 Catalogue, investments in the form of establishing enterprises (excluding financial enterprises) outside of China are required to obtain approval from MOFCOM.


The 2014 Catalogue significantly simplifies the verification requirements for these outbound investments by limiting central verifications to specified investment projects. MOFCOM approval is only needed when overseas enterprises (excluding financial enterprises) are established in sensitive countries, sensitive regions or sensitive industries. Establishment of all other overseas enterprises are only required to file records to the authorities. The 2013 Catalogue reduces the time and cost involved in establishing overseas enterprises and helps to encourage outbound investments. These changes are in line with the general relaxation of the requirements applicable to PRC outbound investment.




For further information, please contact:


Edward Webre, Partner, Deacons

[email protected]


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