For­eign in­vest­ment risk curbed for SOEs

China Daily European Weekly - - Business - By WANG YAN­FEI wangyan­fei@chi­

China is tight­en­ing its grip on out­bound in­vest­ment risks af­fect­ing the na­tion’s fi­nan­cial se­cu­rity, with a code of con­duct for State-owned en­ter­prises mak­ing out­bound in­vest­ments and a black­list com­ing soon.

While the code of con­duct has yet to be re­leased to the public, the over­all reg­u­la­tion frame­work is the same as the one tar­get­ing pri­vate com­pa­nies is­sued on Dec 18, ac­cord­ing to an of­fi­cial with the Na­tional De­vel­op­ment and Re­form Com­mis­sion, who de­clined to be named.

The code for pri­vate com­pa­nies in­di­cates en­ter­prises should ex­er­cise cau­tion in high-lever­age fundrais­ing in for­eign coun­tries and strengthen ef­forts to su­per­vise over­seas of­fices’ ac­tiv­i­ties such as share sales.

The code will com­ple­ment guide­lines is­sued in Au­gust, which laid out rules re­strict­ing in­vest­ment in sen­si­tive ar­eas such as prop­erty, sports and en­ter­tain­ment, the of­fi­cial said.

That guide­line and the black­list sys­tem will be­come ma­jor pol­icy tools in curb­ing in­vest­ment risks, the of­fi­cial added.

Some com­pa­nies vi­o­lat­ing rules have been put on the black­list, ac­cord­ing to an­other gov­ern­ment source fa­mil­iar with the mat­ter.

The gov­ern­ment has yet to pub­lish their names, ac­cord­ing to the of­fi­cial.

Data has shown that ir­ra­tional out­bound in­vest­ment has been ef­fec­tively curbed, of­fi­cials say.

In the first 10 months of the year, China’s non­fi­nan­cial out­bound di­rect in­vest­ment dropped by 40.9 per­cent year-on-year, ac­cord­ing to the Min­istry of Com­merce.

But new guide­lines send the sig­nal that the gov­ern­ment is not re­lax­ing its tight grip, ex­perts say.

“Some ex­ter­nal chal­lenges, such as in­ter­est rate hikes in the United States, may pose higher fi­nan­cial risks for over­seas in­vest­ment in the near fu­ture,” says Tu Xin­quan, a pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nom­ics.

The guide­lines is­sued for pri­vate busi­nesses and SOEs and the black­list sys­tem serve as warn­ings that the na­tion is not will­ing to sup­port il­le­gal ac­tiv­i­ties or in­vest­ment that is con­tra­dic­tory to the over­all ob­jec­tive of driv­ing healthy do­mes­tic eco­nomic growth, ac­cord­ing to Tu.

Cheng Chun­shu, deputy di­rec­tor of Golden Credit Rat­ing In­ter­na­tional, says en­hanced ef­forts go hand in hand with the cen­tral gov­ern­ment em­pha­sis on rein­ing in fi­nan­cial risk. “The gov­ern­ment is not likely to curb do­mes­tic risks on the one hand while let­ting it go unchecked on the other (in for­eign coun­tries),” she says.

Code of con­duct, black­list to tighten up on prob­lem­atic over­seas ac­tiv­i­ties


Staff of CNPC, China’s State-owned en­ergy firm, check fa­cil­i­ties in Turk­menistan in 2013.

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