Jurisdiction - China
Reports and Analysis
China – NDRC Approval For Outbound Acquisitions.

29 December, 2012



The National Development and Reform Commission of PRC (‘NDRC’) is one of the major PRC government authorities to regulate China’s outbound acquisitions. During the recent years, NDRC has taken various measures to encourage PRC companies to ‘go abroad’. The below article elaborates the current NDRC practice. 




Outbound acquisitions made by PRC domestic companies are typically subject to approvals by the National Development and Reform Commission (‘NDRC’) and the Ministry of Commerce. Registration with the State Administration of Foreign Exchange is also required. If the PRC domestic company is state-owned, the approval from the State-owned Assets Supervision and Administration Commission shall also be obtained.

In this article, we will discuss the requirements and procedures to obtain NDRC approval.


Required level of approval


Any outbound acquisition (i) in the resources sector with an investment amount of US$300 million or more, or (ii) in the non-resources sector 
with an investment amount of US$100 million or more, shall be subject to NDRC’s approval at the central level.

For other outbound acquisitions, the local counterparts of NDRC are the competent authorities.


Written information report


The PRC purchaser is required to submit an information report to the NDRC or its local counterparts (as applicable) before formally commencing any business activity in respect of the proposed acquisition. Within seven working days of its receipt of the information report, NDRC shall issue a confirmation letter to confirm receipt of the information report and that the Chinese investor 
can proceed with the proposed acquisition further.


The information report shall normally contain the information in relation to the PRC purchaser itself, the acquisition, the location, scope and estimated scale of investment, and project schedule. 


Final approval


The PRC purchaser shall prepare the required application documents and submit them to the local counterparts (as applicable) of NDRC for pre-review. The local counterparts will review the application documents and decide whether or not to forward the application to NDRC for final approval within 20 working days from its acceptance of the application. NDRC is required to respond within 20 working days from its receipt of the application documents forwarded to it by the local counterpart. An extension of 10 working days is allowable. Additional time may also be taken if NDRC decides to designate a consulting institution to evaluate the overseas investment.


NDRC will take the following factors into account when deciding whether or not to approve the application for the acquisition:


  • a.Compliance with (i) PRC law and industrial policy, and (ii) principles of international law;
  • b.National sovereignty, national security and public interest of China;
  • c. Requirements of sustainable economic and social development, and the strategic resources required for China’s national economic development;
  • d.China’s requirements for implementing its industrial structure adjustment, promoting the export of China’s competitive technology, products, equipment and labour services and absorbing advanced foreign technology;
  • e.China’s balance of capital accounts and foreign debts; and
  • f. Investment strength of the Chinese investor.


Strictly speaking, the PRC purchaser may not enter into any legally binding document for the acquisition before it obtains the final approval of NDRC. However, to our knowledge, in practice, many Chinese investors sign the SPA, etc before obtaining the requisite approval of NDRC or its local counterparts (as applicable) and make the approval of NDRC or its local counterparts (as applicable) as a closing condition.



It is important to note that in practice, not all China outbound investment projects strictly follow the above process and timeline, as specified in the applicable Chinese law.


In the recent proposed acquisition of Sundance Resources Limited (ASX:SDL) by Hanlong Group Co, it took more than two months for Hanlong to obtain the Confirmation Letter from NDRC. In the Confirmation Letter, NDRC imposed a number of conditions on Hanlong. One of the conditions was that Hanlong shall reach a ‘reasonable acquisition price’ with Sundance. Shortly after receipt of the provisional NDRC approval containing the ‘reasonable acquisition price’ condition, the Sundance board recommended a revised Hanlong proposal where the acquisition price per share was reduced by more by than 20% from $0.57 to $0.45. The parties then proceeded to enter into a revised Scheme Implementation Agreement under which Hanlong warranted to Sundance that the revised price of $0.45 is a ‘reasonable acquisition price’ for NDRC approval purposes. Final NDRC approval remains outstanding.

Another issue to deal with practically is a target company’s apprehension regarding the conditionality to a deal from NDRC approval. The approach in the Energy Metals deal was for the target, Energy Metals, to obtain a reverse break fee from CGNPC in the event any Chinese approvals were not forthcoming. In the Sundance deal, following the provisional and conditional NRDC approval discussed above, Sundance required Hanlong to commit to a reverse break fee in the event that Hanlong sought to further reduce the price, which it may do to satisfy NDRC approval conditions.

It is clear that the developments in practice are continuing to evolve such that some Chinese regulatory approvals are now beginning to be obtained upfront prior to deals be signed. In the recent Discovery Metals deal, NDRC approval was obtained upfront and in the Tianqi proposal to acquire Talison Minerals, NDRC, MOFCOM (Ministry of Commerce) and SAFE (Safe Administration of Foreign Exchange) approvals were all obtained upfront. 


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