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Brief Analysis of Catalogue of Investment Projects Approved by the Government (2014 Version)

Date:2020-05-11 19:00:59

On November 18, 2014 the State Council issued the Catalogue of Investment Projects Approved by the Government (2014 Version)1 (hereinafter the "New Catalogue") amending the Catalogue by the same name promulgated on December 2, 2013. In an explanation of the changes made, an official at the National Development and Reform Council (hereinafter: “NDRC”) highlighted three types of changes to the system of approvals, recording filing and supervision for investments: (1) the cancellation of certain approval requirements, (2) the delegation of certain approvals, and (3) the enhancement of supervision.

(Background: Certain investments in China require either filing for approval or filing for the record with corresponding government. The area of the investment or size of the investment will determine at what level of government the approval must take place or if filing for the record is needed. The New Catalogue is the latest in a series of steps taken to liberalize investment in China by reducing the approvals needed.)

The Cancelation of Certain Approvals

Investment in 15 areas, including steel, non-ferrous metals, fertilizer, vessels, urban water supply and other urban infrastructure is no longer subject to any approval. Instead, investments in these areas need only be filed for the record.

The Delegation of Certain Approvals

Additionally, approval for investment in 23 areas has been delegated to the provincial or local governments. These areas include heat power stations,  thermal  power  stations, pump-storage power stations, new ports, general airports, the expansion of airports for military and civil uses, the expansion of oil refinery projects, the exploration of iron mines, new ethylene projects, and so on.

In total, the approval for investments in 38 areas was cancelled or delegated to a lower level of government. Combined with the with similar changes made on 2 December 2013 the total number of areas subject to State Council approval has reduced by 76%.  Approval   for all other investments listed in the New Catalogue must still follow the instructions therein.

The Enhancement of Supervision

The New Catalogue emphasized the importance of supervision both during and after the development of a project and strengthened the coordination of supervision among various departments. In particular, the New Catalogue stated that the Environmental Protection Agency should categorize all projects as either high or low polluting and subject the high polluting projects to stricter examination and approval procedures. In addition, all departments shall accelerate the development of an online platform for approval and supervision which will enable them to share information and further collaborate.

In particular, compared with the 2013 version, the New Catalogue changes the approval   and record-filing requirements for the cross-border investment in the following ways:

(1)    Foreign Investment Projects (inbound investment)
 
Competent Authority Approval or Record-Filing New Thresholds and Requirements Old Thresholds and Requirements
State Council Record-Filing Total investment above USD 2 billion.  
The competent department of investment under the State Council (generally NDRC) Approval Encouraged Category: total investment USD 1 billion or more and requires the Chinese party to have a controlling share.

Restricted Category: total investment USD 100 million or more (excluding real estate).
Encouraged Category: total investment USD 300 million or more and requires the Chinese party to have a controlling share.

Restricted Category: total investment USD 50 million or more (excluding real estate).
Provincial government Approval Restricted Category: total investment less than 100 million or real estate projects. Restricted Category: total investment less than 50 million or real estate projects.
Local government Approval Encouraged Category: total investment less than USD 1 billion and requires the Chinese party to have a controlling share. Encouraged Category: total investment less than USD 300 million and requires the Chinese party to have a controlling share.

Projects not covered in the table above but in certain industries that require approval need to be approved in accordance with the provisions of the New Catalogue.

Overall, more approval authority has been delegated to the provincial and local governments.

(2)    Overseas Investment Projects (outbound investment)
 
Competent Authority Approval or Record-Filing New    Thresholds and Requirements Old Thresholds and Requirements
The competent department of investment under the State Council (generally NDRC) Approval Projects involving sensitive countries and regions or sensitive industries Projects with investment from the Chinese party over USD 1 billion and projects involving sensitive countries and regions or sensitive
industries
Record-Filing Enterprise investment projects under central management and projects with investment from local enterprises of over USD 1 billion. Enterprise investment projects under central management and projects with investment from local enterprises of over USD 300 million.

Thus, except for projects involving sensitive countries and regions or sensitive industries, outbound investments need only file for the record with the competent department of investment under the State Council instead of seeking the department’s approval.

Additionally,   given   the   revisions   in   the   New   Catalogue,   it   seems   likely   that  the Administrative Measures for Approval and Record-filing of Foreign Investment Projects,
 
Administrative Measures for the Examination and Approval of Overseas Investment  Projects and other related provisions will be revised in the near future.

Finally, the new revision of the Catalogue deepen the reform of the investment system and allow enterprises greater independence in making investment decisions which will promote the development of foreign investment and overseas investment. As a result, the Chinese market is likely to further integrate into the global economy.
 
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