Over­seas in­vest­ment scru­ti­nized

Screen­ing will pre­serve ‘go­ing out’ pol­icy while halt­ing im­proper flows of money

China Daily (USA) - - FRONT PAGE - By ZHONG NAN and WANG YANFEI in Bei­jing

China will tighten screen­ing of over­seas in­vest­ment projects amid grow­ing con­cern about cap­i­tal out­flows and ac­qui­si­tion risks, of­fi­cials said on Mon­day.

Of­fi­cials from the Peo­ple’s Bank of China, the Na­tional De­vel­op­ment and Re­form Com­mis­sion and two other gov­ern­ment branches said the coun­try will pro­mote the healthy de­vel­op­ment of out­bound in­vest­ment through mea­sures such as “ver­i­fi­ca­tion” of the over­seas in­vest­ments of some com­pa­nies in ac­cor­dance with rules.

They re­it­er­ated China will stick to its strat­egy of “go­ing out”, which has been boosted by chang­ing from an ap­proval sys­tem to one of col­lect­ing records from com­pa­nies in­vest­ing over­seas. Now, checks are be­ing in­tro­duced in the push to com­bine high­qual­ity off­shore as­sets with pre­cau­tions against risks.

The coun­try’s in­vest­ments in global mar­kets, in the non­fi­nan­cial sec­tor, surged by 53.3 per­cent year-on-year to reach $145.96 bil­lion be­tween Jan­uary and Oc­to­ber, al­ready sur­pass­ing the to­tal for 2015 of about $121.4 bil­lion, data from the Min­istry of Com­merce show.

But there are con­cerns about money out­flows as China tries to keep money from il­le­gally leav­ing the coun­try, given the cur­rent global

8.4 bil­lion to­tal value of leads found through checks on sus­pected im­proper cap­i­tal out­flows in the first six months of the year

busi­ness at­mos­phere.

“We have found cer­tain com­pa­nies and in­di­vid­u­als trans­ferred their as­sets il­le­gally through in­vest­ment ac­tiv­i­ties in over­seas mar­kets in the past 12 months,” said Guo Song, di­rec­tor-gen­eral of the cap­i­tal ac­count man­age­ment depart­ment of the State Ad­min­is­tra­tion of For­eign Ex­change, speak­ing in Septem­ber at a news con­fer­ence.

“We will take mea­sures to curb their ac­tions,” Guo said.

The ad­min­is­tra­tion con­ducted spe­cial checks for il­le­gal cap­i­tal out­flows in the first six months of the year and found 2,335 leads in­volv­ing a to­tal of $8.4 bil­lion, ac­cord­ing to the for­eign ex­change ad­min­is­tra­tion.

Wei Jian­guo, vice-pres­i­dent of the China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes, said China has long been sup­port­ive of out­bound in­vest­ment, es­pe­cially in in­fra­struc­ture sec­tors, and it has no rea­son to in­tro­duce tight­ened poli­cies.

In the past, the gov­ern­ment has more closely watched out­bound in­vest­ments by Sta­te­owned com­pa­nies than those of pri­vately owned com­pa­nies. That is ex­pected to con­tinue.

“It is un­der­stand­able to con­duct re­view pro­ce­dures on out­bound in­vest­ment with a value over $200 mil­lion taken by State-owned en­ter­prises, as the gov­ern­ment wants to make sure that its money is wisely in­vested and gen­er­ates prof­its af­ter a cer­tain pe­riod,” Wei said.

In com­par­i­son with Sta­te­owned en­ter­prises, Wei said com­pa­nies from the pri­vate sec­tor have more in­de­pen­dence to make their in­vest­ment de­ci­sions in global mar­kets.

Ge Xiangyang, an in­vest­ment lawyer at the Bei­jing of­fice of the Hong Kong-based law firm Mayer Brown JSM, said ac­tiv­i­ties in some de­vel­op­ing coun­tries may carry big­ger risks. In those cases, many Chi­nese com­pa­nies are not fa­mil­iar with the lo­cal le­gal and com­mer­cial en­vi­ron­ment and prof­itabil­ity mod­els, Ge said.

Yi Gang, vice-gov­er­nor of the Peo­ple’s Bank of China, said on Sun­day that he is con­fi­dent cap­i­tal that has left China won’t stay abroad in the fu­ture, cit­ing China’s abun­dant for­eign re­serves and huge mar­ket.

“As the Chi­nese econ­omy re­cov­ers and in­sti­tu­tional re­forms im­prove the busi­ness en­vi­ron­ment, the cap­i­tal that has left will come back,” Yi said on Sun­day.

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