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During this sensitive time when capital control measures are about to come out, through an interview of officials of the State Administration of Foreign Exchange (“SAFE”), the Xinhua News Agency on December 8 revealed the details and direction of policy on the recent tightening of overseas direct investment (“ODI“).  The effects on ODI from the tightening of policy restrictions, starting from several months past and up to present, are rapidly magnifying.

At the opening of the news interview, it was stated that cross-border capital flows were generally stable, and according to monitoring, there was no finding that desire for foreign exchange purchases by enterprises or individuals would surge sharply; however, it was pointed out that a large number of ODI projects have already been placed under scrutiny of various departments (i.e., NDRC, MOFCOM, PBOC, and SAFE).  During the interview, SAFE officials pointed out that four categories are considered abnormal circumstances of ODI behavior: (1) newly established enterprises without substance of business carry out overseas investment; (2) the scale of overseas investment is far greater than the registered capital of the domestic parent company, and the operational status as reflected by financial statements of the parent company is not comparable to support the scale of overseas investment; (3) no correlation exists between the main business of the domestic parent company and the overseas investment project; (4) the RMB used for investment obtains from an abnormal source, being suspect of illegally transferring assets for Chinese individuals and illegal operation of underground money exchange.  Having such a wide range for the definitional scope of abnormal behavior is really rare.  From the perspective of SAFE, only enterprises with the capability and qualification can make overseas direct investment, while pooling of funds by individual investors for conducting overseas direct investment does not conform to the so-called “authenticity and compliance” principle.

In addition, this interview once again mentioned the ways of foreign exchange payment violations by individuals, that is by way of split where the annual remittance quotas of other individuals are used in performing fund remittances; as well as the possible consequences of such violations, that is these individuals might be put on an “Attention Name List,” and have their annual remittance quotas for the next two years canceled, and where circumstances are serious, be put on file for punishment.

Our Interpretation: Except for ODIs conducted by enterprises possessing ample financial strength and where the ODI is closely related with the main business of such enterprises, other types of ODI would basically be stopped.  In addition, there is a large possibility that the next step of SAFE will be to take further steps in regulatory and enforcement measures regarding overseas investment by individuals.

境外直接投资受限——临时资本管制的第一步？

在这样一个资本管制措施呼之欲出的敏感时刻，新华社于12月8日对国家外汇管理局(“外管局”)有关负责人的新闻专访透露了近期有关境外直接投资(“ODI”)收紧的细节以及政策走向。从几个月前就开始的口径收紧到目前的明令限制，境外直接投资受到的影响正在急剧放大。

新闻专访开篇就称跨境资金流动总体相对稳定，根据监测没有发现企业和个人购汇意愿激增，但随之指出大量境外直接投资项目已经置于各部门（发展改革委、商务部、人民银行、外汇局）的重点审查之下。外管局负责人在专访中指出了四类被认为存在异常情况的境外直接投资行为：(1)刚成立的没有实体业务的企业开展境外投资；(2)境外投资规模远大于境内母公司注册资本，母公司企业财务报表反映的经营状况难以支撑其境外投资的规模；(3)境外投资项目与境内母公司主营业务不存在相关性；(4)用于投资的人民币来源异常，涉嫌为个人向境外非法转移资产和地下钱庄非法经营。上述对异常行为的界定范围之广殊为罕见。在外管局看来，只有有能力和有条件的企业才可以开展境外直接投资，而汇集个人投资者的资金进行境外投资不符合所谓“真实合规”的原则。

此外，该篇专访又再次提到个人对外付汇的违规方式，即通过分拆方式，利用他人的年度用汇额度进行资金汇出，以及此种违规行为的可能后果，即个人可能被列入“关注名单”，取消其之后两年内的便利化购汇额度，情节严重的可以立案处罚。

我们的解读：除非是具备充足资金实力的实体企业进行与其主营业务密切相关的境外直接投资，其他类型的境外直接投资基本上会被叫停。此外，对个人的海外投资，外管局下一步有比较大的可能采取进一步的监管手段和执法措施。