March 17,2009

Overseas Investment on Resources and Manufacturing Made Easier

By CSC staff, Shanghai
The Ministry of Commerce (MoC) yesterday issued new Regulations Governing Overseas Investment, encouraging enterprises to invest overseas by simplifying approval procedures.  

From now, overseas investments by domestic firms of between $10 million and $100 million need only be approved by provincial commerce authorities, and MoC will merely take charge of approval of important overseas investments. Meanwhile, the approval procedure is also simplified. Most applications will gain response three days after their submission. After the new regulation becomes effective, about 85% overseas investments of Chinese enterprises are expected to be approved by provincial commerce authorities.

Chinese companies?overseas investments are not slackening with the slowing of the global economy, and domestic resource and manufacturing companies are especially active in looking for overseas investment. According to MoC figures, 2008 foreign direct investment by Chinese enterprises reached $52.15 billion, up 96.7% year on year, and sales from overseas projects reached $56.6 billion, 39.4% over 2007’s. During January and February, 2009, sales from overseas projects reached $7.96 billion, up 24.8% year on year.  

The speed is of this development is beyond MoC expectations. The Ministry also declared that Chinese companies?ability to investment is strengthening. Their investment modes are developing from greenfield investment (investment in a manufacturing, office, or other physical company-related structure or group of structures in an area where no previous facilities exist) to overseas M&A and public offering. Their investment fields have also expanded from processing only to resource development, manufacturing, and R&D.  

International prices for bulk commodities have dropped sharply over the last nine months, offering strong opportunities to buy into overseas resource companies. Meanwhile, Chinese manufacturing companies are also looking to extend production chains and expand their markets.

According to Zhang Xiaoji, an expert with the Development Research Center of the State Council, Chinese manufacturing firms have the chance to breakthrough in their overseas investment, and can also gain in R&D and sales. Meanwhile, setting factories in their sales destinations will not only sustain competitiveness of Chinese products, but also support the growth of China’s exports.

As it simplifies approval procedures, MoC is also trying to set other policies to support the financing of Chinese companies?overseas investment. Minister Chen Deming, who has recently been on a visit to four European countries, says commerce authorities must support the overseas investment of qualified enterprises with tax and financial policies.

It is reported that the Chinese enterprises?delegation to Europe for overseas investment, led by the MoC, is returning on Friday. Members of the delegation include financial firms that have been surveying the situation for overseas M&A and investment during their visit.

The China M&A Association is encouraging Chinese firms to seize current opportunities to raise the percentage of factor trade and investment goods trade and conduct equity level cooperation with European and US companies in the real economy. The government may set up a special fund for overseas M&A to support domestic enterprises, and further develop its risk-measuring and guarantee system.


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