China has released a code of conduct for private companies investing abroad as it seeks to head off risky acquisitions, with state media yesterday reporting that a blacklist of violators was in the works.
The move by the country’s top economic planning agency appears to be the latest in a government campaign to prevent acquisitive Chinese firms from overextending themselves with ill-advised deals abroad that could threaten financial stability at home.
The guidelines, released on Monday by the Chinese National Development and Reform Commission, contain few hard and fast rules, but rather a collection of big-picture advice on operating overseas.
This includes staying within a company’s financial constraints and core competencies, avoiding high-leverage financing, respecting local laws and customs and adhering to socially and environmentally responsible operations.
The state-run China Daily yesterday reported that a similar code for state-owned enterprises is also in the works, as well as a blacklist of violators.
It cited an unnamed commission official, who said the guidelines and blacklist “will become major policy tools in curbing investment risks.”
The code is to complement guidelines issued in August, which laid out rules restricting investment in industries such as property, sports and entertainment, the official was quoted saying.
China has moved aggressively in the past year to halt a flood of overseas investment that has raised concerns of capital flight and to contain ballooning debt at home that has drawn warnings of a potential global financial crisis.
In particular, authorities have reportedly targeted large private Chinese companies such as Dalian Wanda Group Co (萬達集團), Fosun International Ltd (復星國際), HNA Group Co (海航集團) and Anbang Insurance Group Co (安邦保險集團), which have drawn increased scrutiny over concerns they were racking up dangerous debt levels with tens of billions of US dollars in sometimes flashy foreign investments.
In conjunction with the private firm guidelines, the commission also released a statement by an unnamed official at the agency saying that some Chinese companies had encountered “irregularities in overseas investments.”
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