According to a press conference held by Chinese authorities, China is going to have more restrictions on the outbound investment in some areas.
On Dec. 6, 2016, the officials from the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), the People’s Bank of China (PBC), and the State Administration of Foreign Exchange (SAFE) delivered a press conference regarding stricter supervisory measures towards outbound investment. According to them, China is still holding the same regulatory policy as before towards outbound investment; however, the regulatory authority will pay full attention to the following areas due to their inherited risks:
1. Outbound investments made by limited partnership entities;
2. Large investments unrelated to a firm’s core business;
3. Outbound investments involving companies that set up investment vehicles in a rush;
4. Large subsidiaries controlled by much-thinner-capitalized parent firms;
5. Irrational outbound investments in the areas of real-estate, hotels, film studios, entertainment industry, and sports clubs.
Although there are no such detailed measures coming out yet, this information is a red-flag for the future outbound investments in the aforementioned areas and the official also “advised” related enterprises to make decisions “prudently”.
Observers have pointed out that based on the scale of this announcement (4 major departments are involved) and the timing of this announcement (currency depreciation), there will surely be a closer or even more strict regulation on the outbound investment in such areas afterwards.