The Chinese central government has released a list of “sensitive industries” that will subject to curb on outbound foreign investment starting in March.
China’s National Development and Reform Commission (NDRC) has just released its “Foreign Investment Sensitive Industry Catalogue (2018 Edition) (境外投资敏感行业目录（2018年版）), which includes real estate, hotels, cinemas, entertainment and fitness centres amongst the sectors subject to outbound foreign investment restrictions.
The catalogue, which comes into effect on 1 March 2018, also seeks to curb “the establishment of equity investment funds or investment platforms overseas that do not possess any specific, substantive projects.”
NDRC also recently released the “Enterprise Foreign Investment Administrative Measures” (企业境外投资管理办法) which comes into effect on the same date as the catalogue, and stipulates that “sensitive projects undertaken by investment entities either directly or via foreign enterprises that it controls fall within the scope of approval and administration, while non-sensitive projects undertaken by investment entities directly are subject to filing administration.”
According to the Measures any projects involved in “sensitive countries and regions” or sensitive industries are categorised as “sensitive projects,”
Last year Beijing cracked down on outbound foreign investment due to concerns over risk and capital outflows, with the government pointing specifically to acquisitions by cash-flush Chinese companies in the real estate, entertainment and fitness sector as “irrational.”
According to a recent report from the South China Morning Post, the foreign investment crackdown in tandem with Beijing’s shadow banking campaign has already left many Chinese companies who pursued over-leveraged foreign acquisitions last year unable to service their debts.