State-owned Enterprises To Be Held Liable for Foreign Investment Losses


A new law promulgated by China’s Ministry of Finance could see senior executives at the country’s state-owned enterprises pursued for liability in the case of heavy losses on foreign investments.

On 1 August MoF formally promulgated its “State-owned Enterprise Foreign Investment Financial Administrative Measures” (国有企业境外投资财务管理办法), which calls for the implementation of  a professional financial accountability system by state-owned enterprises for their foreign investments.

The system outlined by the Measures would include pursuing SOE executives for liability in relation any losses incurred by their foreign investments.

Leading figures from MoF said its research indicates that “unscientific decision-making and lack of necessary procedures” were key factors behind such investment losses, with some SOE executives failing to undertake adequate financial risk and feasibility assessments in advance.

The ministry also complained that certain enterprises have insisted on pursuing overseas investments despite its explicit opposition.

Beijing has recently sought to stymie the overseas acquisitions spree of some of China’s biggest companies, calling for domestic banks to review their level of exposure to debts incurred by corporate giants such as Anbang Insurance and Dalian Wanda via foreign investments.