China plans to tighten up supervision of domestic companies looking to invest overseas, the government said, after some high-profile investments abroad turned sour amid the global economic crisis.
The Ministry of Commerce will require Chinese firms to seek its approval for overseas investment of US$100 million or more, according to draft rules published on its Web site late on Wednesday.
Companies will also need the ministry’s approval for investments in countries that have no diplomatic relations with Beijing, overseas infrastructure projects or countries and regions with high risks, it said.
Non-central government firms will need approval from provincial branches of the ministry for overseas investments of between US$10 million and US$100 million.
The same rule applies for non-central government companies looking to invest in overseas energy and mining companies and real estate development projects of any size, it added.
The new draft rules, which will replace existing rules that came into force in 2004, are aimed at “promoting and regulating overseas investments,” the ministry said.
It is soliciting public opinion on the draft rules until Jan. 20.
Under existing rules, companies directly controlled by the central government need to apply for the ministry’s approval for investments abroad while other firms only need the nod from the provincial branches.
The move came after a few domestic firms faced severe criticism at home for their investment choices after the global financial crisis led to heavy paper losses, or unrealized losses, on investments that have yet to be cashed in. These include Ping An Insurance Group (平安保險), China’s second biggest insurer, and China Investment Corp (中國投資公司), the country’s US$200 billion sovereign wealth fund.