China'S "Sea" Investment Ministry Of Commerce No Longer Trial

In early September, the Ministry of Commerce announced that starting from October 6th this year, according to the newly revised "overseas investment management measures", in addition to projects involving sensitive countries or regions and sensitive industries, the Chinese enterprises will adopt the filing system for any amount of overseas investment in the future, and the Ministry of commerce will not further approve them.

The reporter learned that the practice of completely giving up the examination and approval authority has been experimented for a year in the Shanghai free trade area.

A pcript seems to illustrate the reaction of the enterprise: Dai Haibo, executive deputy director of the Shanghai Free Trade Area Management Committee, revealed in the media interview that as of the end of August this year, the Shanghai free trade area has completed 79 projects for foreign investment, and $1 billion 700 million has been invested in Shanghai through the free trade area.

Although the Ministry of Commerce opened the door to overseas investment, many journalists interviewed admitted that they were worried that the local regulatory authorities would be faced with a disguised examination and approval in the specific implementation level, and the problems such as the lack of supervision and legislation were still to be solved.

Filing for overseas investment

Reporters noted that the Ministry of Commerce's deregulation efforts unprecedented, in fact, in the Shanghai free trade zone test process to liberate a deeper degree.

According to the "management measures for overseas investment project record" promulgated by the Shanghai free trade zone at the early stage of its establishment and the measures for the record management of overseas investment start-up enterprises, there is still a red line for the general projects of overseas investment which allow the implementation of the filing system: less than 300 million dollars.

Li Jian, deputy director of China Foreign Trade Research Department of the International Trade Research Institute of the Ministry of Commerce, said in an interview with China Economic Weekly that the policy change of Chinese enterprises' overseas investment from examination and approval system to approval system to filing system has gone through over 30 years. "The trial process of the free trade area is to make policy makers more daring, and gradually change their understanding and realize that enterprises can at their own risk, and may not necessarily pass the examination and approval."

Li Yunfeng, a general manager of a capital construction company registered in the Shanghai free trade zone early last year, told reporters that the company has operations in Singapore and Australia, and has always had the plan of "Lazi" overseas. This year it has become a member of the "Sea Corps" registered in the free trade area.

"The difference between the approval system and the filing system is that the operation process of the enterprise investment is completely different. The former is that the enterprise first goes to the city planning, land and resources, environmental protection and other departments to go through the formalities one by one, and then reports to the government authorities together with the project application report. In essence, the project has invested a lot of initial cost before the trial, but whether it can be approved by the government in the end is not enough."

Li Yunfeng admitted to reporters that the embarrassing situation that many different companies had completed the pre procedure and repeated construction at the same time had wasted many times on the operation resources of enterprises.

In contrast, the Shanghai free trade zone has shortened the whole process of the project to the exchange rate investment.

"First get the record voucher, and the enterprise goes to each organization again, which means that it is just going through the process. In the past, the approval process took three or four months, and now it only takes about a week in the district."

Li Yunfeng said.

Equity investment fund Hongyi investment to China Economic Weekly information also shows that its first single PE overseas investment completed in the Shanghai free trade area has spent only 5 working days, and then only 4 working days to complete the investment in STX company.

The Ministry of Commerce has cancelled $300 million of the total amount of restrictions, which is totally deregulation for general projects. This is indeed epoch-making in the history of Chinese enterprises' overseas investment.

A chief executive familiar with the policy recalled to the China Economic Weekly that more than 20 years ago, the project proposal and feasibility report of enterprises with more than $1 million in investment need to be submitted to the State Planning Commission for approval. The contracts and articles of association need to go through the Ministry of trade and economic cooperation. This rigorous high-level examination and approval mode has been extended to 2004.

"This year, the development and Reform Commission began to implement the approval system, but the approval system did not bring much convenience to the enterprises. It only put the approval authority of the amount to be restricted to the provincial level, but it was only a reallocation of the internal interests of the administrative monopoly."

The boss said frankly that the pition from the approval system to the filing system has been going on for 10 years, and it is also the result of the game and constraint between the administrative departments.

Enterprises are worried about hidden approval.

However, for the filing system of boots landing, the reaction of all parties is not entirely commended. Some business circles are even worried.

"If the administrative department plays the role of supervision only in the process of filing, it is the healthiest one, but it is likely to become a disguised examination and approval when it is implemented, that is, it will play the role of recognition and permission, which means that the administrative department can decide whether the enterprise can get the record. This will not only help to change the status quo, but also have more room for rent-seeking, because the original approval must comply with the" administrative licensing law "and the record will not be subject to any restrictions.

A provincial development and Reform Commission did not want to be named to say "China Economic Weekly".

Wang Xiaoguang, a researcher at National School of Administration's decision consultation department, also told reporters: "as far as I know, the approval system is only simplified to a program, but there will still be lots of pre approval. We did some investigations in June and July. In some places, the Ministry of Commerce has abolished the approval system, but other departments have not cancelled it. The whole system straightens out a long time."

"Pre examination and approval" refers to the government's approval of a series of evaluation procedures when setting up an enterprise.

Under the approval system, the initial cost of most enterprises has been reduced, but the cost of environmental impact assessment, water resources argumentation, geological hazard assessment, soil erosion assessment and flood control assessment has increased significantly, and most of the accreditation bodies are actually monopolized by administration.

Shanghai Free Trade Zone

Zhu Mingxue, a Biotech Corp director, has explained to China Economic Weekly.

There are also concerns that some local governments may make policy allocation of public resources through the establishment of support projects, awards and evaluation projects, naming and listing projects, so as to turn the filing system into a disguised examination and approval.

In the pilot free trade zone of Shanghai, the discussion on filing system has shifted its focus to the level of supervision.

Shen Guobing, a researcher at the Institute of world economics, Fudan University, told China Economic Weekly that for investment projects outside the negative list, the approval system should be changed to the filing system. Government investment access management should be shifted from focusing on ex ante approval to paying attention to matters and supervision afterwards. The power of ex ante examination and approval of the government should be weakened. Instead, it should be strengthened in the matter and after supervision, but all of these must establish the highest standard credit system in the country.

"No matter foreign capital or Chinese capital, we must establish credit record and credit rating in the business activities of the free trade area. We must build a legal system and a rule of law environment to strengthen corporate self-discipline. Otherwise, the supervision of government regulatory departments is difficult to achieve."

Shen Guobing said.

According to the reporters, the Shanghai free trade area is also studying the credit system of the enterprises in the construction area, and is committed to establishing a credit environment that enables the law-abiding enterprises to develop rapidly and the lawless enterprises to withdraw automatically.

Reporters learned in the interview that up to now, there is no uniform and explicit overseas investment law in our country. It is impossible to unify and standardize the standards, approval procedures and management methods for overseas investment of state-owned enterprises, private enterprises, private enterprises, joint ventures and other investment entities in the form of law, and the post supervision mechanism is also in a vacuum.

On the other hand, in addition to the Ministry of Commerce, the NDRC is also a regulatory agency for overseas investment.

It has been learned that the overseas investment management system, which was approved mainly by the approval system, was established in 2004, and consists of two parts. First, the Ministry of Commerce and the provincial competent commercial departments have approved the overseas direct investment of enterprises; two, the state and provincial development and Reform Commission has approved the overseas investment resources development category and the large amount of foreign exchange direct investment projects.

Therefore, the approval items for overseas investment are also stipulated by the Ministry of Commerce and the national development and Reform Commission.

The lack of coordination between the two departmental rules inevitably leads to the phenomenon of double approval.

For example, to invest abroad in a country or a specific country or region (such as a country subject to international sanctions, a war or internal disorder), the investment projects must be approved by the national development and Reform Commission and the Ministry of Commerce.

Moreover, the Ministry of Commerce has fully liberalized Chinese enterprises.

As for the filing system, the implementation of the NDRC is still based on the "overseas investment project approval and filing management measures" which was revised in May this year.

According to the seventh provisions, the foreign investment projects of China's investment of US $1 billion or more still need to be approved by the national development and Reform Commission.

It is worth mentioning that, according to the seventy-second provision of the People's Republic of China legislative act, when the various departments of the State Council make regulations, more than two items of the terms of reference of the State Council departments shall be submitted to the State Council for the formulation of administrative regulations or the relevant departments of the State Council to formulate rules and regulations.

Therefore, in recent years, the industry calls for the State Council to take the lead in formulating an overseas investment law.

In fact, in developed countries, due to the development requirements of overseas investment, the examination and approval authority is usually a specialized administrative body prescribed by law, executed by a department or committee of the government, or a State Reserve Bank, or a government organ and a bank.

Take South Korea as an example, the approval of overseas investment is executed by the Minister of Finance and executed by the president of the Bank of Korea.

In China, the number of overseas investment examination and approval organs is very complicated. At the central level, not only the national development and Reform Commission and the Ministry of Commerce, the Ministry of finance, the central bank, the foreign exchange administration, and the Ministry of foreign affairs all enjoy part of the overseas investment approval authority.

At the same time, the participation of higher authorities in provinces, autonomous regions, municipalities directly under the central government, cities and cities as well as other enterprises in different cities has increased the dilemma of multi-level examination and approval.