China’s Ministry of Commerce has signalled further tightening of controls on outbound foreign investment following the issuance of the “Guidance Opinions on Further Guidance and Standardisation of Overseas Investment” (关于进一步引导和规范境外投资方向的指导意见).
At a press conference held on 24 August MOFCOM spokesperson Gao Feng said that the central government would deepen reforms of regulatory mechanisms for Chinese investment overseas, and increase scrutiny of the “veracity” of outbound investment.
Gao said that the issuance of the latest “Guidance Opinions” had been prompted by “the emergence of several problems in relation to the overseas investments of Chinese enterprises, especially last year.
“Irrational overseas investment has grown rapidly, bringing definite risk and hidden danger to China’s financial security and the security of state-owned assets.”
The central government tightened its capital controls towards the end of last year after overseas acquisitions reached a record-breaking $221 billion in 2016,
This subsequently led to a precipitous drop in outbound investment during the first half of 2017, including a 82% decline in overseas real estate acquisitions.
The central government has continued to warn against what it refers to as “irrational” outbound investment by Chinese companies, seeking thwarting the overseas buying sprees of major companies such as Wanda Dalian and HNA.
Reuters has also reported that Beijing plans to further intensify its crackdown on outbound investment, with the National Development and Reform Commission and MOFCOM reportedly requesting that companies provide justification for the terms surrounding their acquisitions of overseas assets, including valuations and financing arrangements, and a focus upon those companies that are not deemed by the authorities to be “strategic.”
According to Gao the central government’s regulatory work in relation to foreign investment will focus on several keys areas in particular going forward, including “strengthening assessments of the veracity of outbound investment…firmly curbing false, irrational overseas investment…improving the overseas investment filing and reporting regulatory system…guiding and standardising the overseas investments of enterprises, strengthening regulation during and following overseas investment…and ensuring that enterprises ‘go abroad’ in a standardised, healthy fashion.”