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Understanding the New Chinese Outbound Investment Regulations

New Chinese Outbound Investment Regulations

Doug Ferguson and Sunny Song discuss new Chinese outbound investment regulations.


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On 1 March 2018, new Administrative Measures for Overseas Investments by Enterprises (the measures) by Chinese National Development and Reform Commission (NDRC) will come into effect.

KPMG’s report, Demystifying Chinese Investment in Australia, established that Australia is the second largest country recipient of Chinese Outbound Direct Investments with close to US$90 billion of accumulated new investments from 2007 to 2016. Understanding the new Chinese government regulations is therefore important for Australian vendors and deal advisors to properly evaluate acquisition proposals from potential Chinese investors

Key Changes

The new measures aim to improve the competitiveness of Chinese outbound investment by:

  • Simplifying the filing and approval procedures
  • Eliminating the filing requirement of a project information report before commencing substantive work on the transaction
  • Limiting the government processing time, and
  • Extending the filing confirmation / approval notice to two years unless there are any material changes in the key terms.

We note these new measures also extend the coverage to the investments made by controlled entities in foreign countries, for example, by Australian based subsidiaries of Chinese companies. The measures build in flexibility for the NDRC to exercise discretion by modifying the sensitive industries list periodically. The sensitive industry list currently includes:

  • research, production and repair of weaponry
  • cross-border water resources development and utilisation
  • news media operation and 
  • other industries restricted according to national macroeconomic control policies.

A Sensitive Industry Directory will be released by the NDRC separately.

Decision Tree

We have designed a decision tree below to help our clients understand the procedures and relevant processing time:


decision tree

Some Examples

If an Australian company is selling equity to a State Owned Enterprise ("SOE") with an existing subsidiary in Sydney, and the deal size is more than US$300 million, as long as the Australian company isn't operating in the sensitive industries, the SOE is obligated under the new measures to submit the Large Non-sensitive Investment Report via the NDRC's online reporting system before the settlement of the transaction. If the transaction size is below US$300 million, no action is required under the new measures. However, filing online with NDRC is required if the Chinese SOE provides guarantees or other financing support to its Australian subsidiary in relation to this transaction.

If an Australian company is selling to a Chinese Privately Owned Enterprise ("POE") who is not yet in Australia and the deal size is over US$300 million, this direct investment by the POE needs to be filed with NDRC and the NDRC's Record-filing Notice should be obtained before completion of the transaction. It is worth noting Chinese POE only needs to file with central NDRC if the deal is significant (i.e. over US$300 million) whereas for smaller transactions the POE can file with its local provincial NDRC.

If an Australian vendor is disposing a media or entertainment business to a Chinese company, since the media and entertainment business is classified within the list of sensitive industries, the Chinese enterprise will need to obtain the NDRC’s approval prior to the implementation/completion of the transaction. Unlike the previous requirement where an approval is to be obtained from NDRC before entering into any legal contract, the new measures closed this gap between the previous regulations and the market practice (i.e. approval before completion).

Future Impact

Although the impact of the new measures are yet to be seen, we expect them to encourage prudent and well considered future outbound investments by Chinese businesses - especially ones that are aligned with the overall Chinese political and economic objectives, such as the “one belt one road” initiative, and investments in advanced technology and manufacturing.

KPMG's Transaction Service Team is very experienced in dealing with Chinese inbound investments into Australia. We are not only helping clients to fill the knowledge gap, our bilingual team members can also help with the language and cultural gaps.

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