Export of investments to China has practically ceased to be controlled

The Chinese authorities have expanded the corridor for investments abroad that do not require mandatory approval to a record level: now Chinese companies will be able to invest in foreign projects up to $1 billion. The measure was a continuation of the reform to liberalize the financial sector, officially announced last year. However, investors will still not be able to withdraw capital without justifying the purpose and subsequent recording of income and expenses; currency restrictions remain in force.

According to the resolution of the Ministry of Commerce of the People's Republic of China, starting next month, Chinese companies will only need to register a project in the amount of $1 billion in order to make foreign investments in the amount of up to $1 billion; official permission will only be required for state-owned companies, as well as in the case of capital investments in countries with which the usual trade regime has not been established and investments. At the same time, particularly large investments in the amount of over $1 billion will continue to be approved by the State Committee for Development and Reform, and over $2 billion - by the State Council of the People's Republic of China. The State Council issued a resolution on the reform in early May, but specific threshold values were not named then.

At the moment, all foreign capital investment projects amounting to more than $100 million (in energy, mining and other sectors “where there was a shortage of investments in the Chinese market” - more than $10 million) must be approved by the Ministry of Trade or its regional divisions. In addition, the Ministry of Commerce collects company reports on investment results, and the Agency for Foreign Exchange Regulation (SAFE) collects reports on foreign exchange transactions. Nevertheless, the flow of investments from China since 2005 (when state-owned companies also began to actively invest in foreign projects) has been increasing by an average of 35% per year and by 2017 may exceed the volume of capital investments in the Chinese economy, experts from the Economist Intelligence Unit (EIU) predict. This year, Chinese investors invested a total of $52.6 billion abroad in non-financial companies (in 2013, excluding Hong Kong - $115 billion). The measure will significantly increase the volume of investments coming to Russia from China, says Kirill Dmitriev, General Director of the Russian Direct Investment Fund, located in Beijing. As explained in the Russian-Chinese Investment Fund, a significant part of the projects involve investments of up to $1 billion.

Experts note that control over foreign exchange transactions remains among the main obstacles for investors. Despite the reduction and simplification of these procedures back in 2009, registration of all transactions for the transfer of funds abroad (indicating the sources of investments made), as well as income and expenses after the transaction is still required, explains the Clyde&Co representative office in Beijing. Facilitated conditions for exchange control and project approval are already in place in special economic zones, in particular in the pilot Shanghai Port Zone, launched in September 2013, shortly before the official announcement of the course to liberalize the financial sector. However, the Chinese currency will not be fully convertible until 2020, according to the country’s Central Bank.

Tatiana Edovina

China released capital abroad