Monday February 9 2015

News Source: Global Disclosures

Focus: Foreign Investment

Type: General

Country: China




The People’s Republic of China’s Ministry of Commerce has published the draft Foreign Investment Law, open for public comments until 17 February.

Under the draft law, corporate vehicles available to Chinese nationals will be generally available to foreign investors and the “negative list” approach, which has been adopted by the Shanghai Free Zone, will be implemented nationwide. The implications of this are that, unless it falls within the restricted or prohibited list, any foreign investment project will be subject to post­event reporting without requiring prior approval.

National Security Review
Current rules on national security review are proposed to be expanded as below:

  • The scope of the review would be expanded to include any foreign investment that harms or may potentially harm national security.
  • Factors that will be taken into consideration will include implications on national defence facilities, R&D capabilities, information and network security, and a “catch-all” clause.
  • The regulator may order and/or implement appropriate measures to combat any perceived harm to national security.
  • Decisions as a result of the review process are proposed to be immune from review by administrative bodies or courts.
  • Separate regulations to deal with the review of target companies in the financial sector will be proposed at a later date.

Revised reporting requirements

New rules on reporting are being proposed as follows:

  • Investment implementation reporting – a foreign investor will have to file a report before, or within 30 days after, the “implementation of an investment”, which means the date on which registration with the relevant Chinese authority is required or (if no such registration is required) the date of completion.
  • Periodic reporting – a foreign­invested enterprise will have to file an annual report before April 30 every year on relevant matters concerning the foreign investor and the foreign­ invested company. Where a foreign investment does not involve the setting up or changes to a foreign­invested company, the foreign investor itself will have to file a short form report about itself and the foreign investment made.

Click on the above link for the consultation (in Chinese).