20 August 2018
Pursuant to the Administrative Measures on Overseas Investments (promulgated by the Ministry of Commerce on 6 September 2014 and effective as of 6 October 2014), non-financial outbound direct investments (ODI) carried out by enterprises established in mainland China in “sensitive countries and regions” (i.e. countries with which China has not established diplomatic relations, countries under the United Nations’ sanctions, and countries and regions which MOFCOM may specify where necessary) or “sensitive industries” (i.e. exporting products and technologies that are restricted from export by the Chinese government, as well as industries affecting the interests of more than one country (region)) shall be subject to approval of the Ministry of Commerce (MOFCOM). Central Enterprises (i.e. enterprises in which the State-owned Assets Supervision and Administration Commission of the State Council performs the capital contributor’s duties, enterprises owned by them, and other entities under the management of the Central Government) shall directly apply to MOFCOM. In contrast, Local Enterprises (i.e. all enterprises located in Mainland China other than Central Enterprises) shall apply to MOFCOM through the provincial department in charge of commerce at their locality (Local Provincial COFCOM), i.e. a Local Enterprise shall first submit the application documents to the Local Provincial COFCOM, which will conduct a preliminary review; after this preliminary review, the Local Provincial COFCOM will forward its preliminary review opinion together with all application documents to MOFCOM for final approval.
On 28 July 2018, the State Council issued the Decision on Abolishing a Batch of Administrative Approval Items, which among others abolishes the “preliminary review for approval of establishment of overseas enterprises (excluding financial enterprises) by domestic enterprises” by Provincial COFCOM. This will streamline the MOFCOM approval process for non-financial ODI by Local Enterprises.
In simple words, the two-step approval procedure for non-financial ODI by Local Enterprises has been eliminated, and as a result the approval procedure for non-financial ODI by Local Enterprises will be the same as the one for Central Enterprises.
For the sake of completeness, please note that: