China’s State Council recently implemented further reforms to the system of investment in China. The Decision on Reforming the Investment System (“the Decision”), issued on July 16, 2004, mostly implemented further reforms to the system of domestic investment. However, it also implemented further reforms to the system of foreign investment in China. Verification (and not examination and approval) of foreign investment projects that do not utilize state funds will now be required. The application process will thus be simplified as a project proposal and a feasibility study will no longer be required.
The threshold for foreign investment projects that require approval at the central government level was raised. Previously, foreign investment projects with a total amount of investment of over US$30 million were subject to approval at the central government level. The threshold was raised to US$100 million for projects falling within the encouraged and permitted categories, and to US$50 million for projects falling within the restricted category, of the Foreign Investment Industrial Guidance Catalogue.
As a follow up to the Decision, China's National Development and Reform Commission (“NDRC”) recently issued the Provisional Management Rules on Verification of Foreign-Invested Projects (“the Rules”), which came into effect on October 9. The Rules specify the responsibilities of the foreign investment verification authorities as well as the content, application procedure and timeframe of verification. An investor is now required to submit an application report to the NDRC containing information on the investment project, including its term of operation, construction scale, location, natural resources requirement and environmental impact. NDRC is now required to complete verification within 20 working days of receipt of the application report.
The Rules also list general conditions that a foreign investment project is now required to meet to qualify for verification. However, it remains unclear the extent to which the verification standard differs from the existing examination and approval standard.
Originally appeared in Dorsey's China Report