CHINESE UPDATE – NDRC Will Deregulate Outbound Investment Review and Relax Sensitive Project Review


  • NDRC launches Draft for Comment for Order 9, which proposes further relaxation measures on PRC outbound investment.
  • The controversial “road-pass” requirement might be alleviated.
  • Approval procedure and application documents for the approval of Sensitive Projects may be simplified.

Main Article

Chinese National Development and Reform Commission (“NDRC“) launches Draft for Comment of Measures for Administration of Approval and Filing of Outbound Investment Projects (“境外投资项目核准和备案管理办法” in Chinese, the “NDRC Order 9“) (the “Draft for Comments“) on April 13, 2016.  The Draft for Comments (1) alleviate “road-pass” requirement for outbound acquisition/bidding project; and (2) relaxes approval procedure and document requirements for approval of Sensitive Projects.  Should Draft for Comments be passed, PRC outbound investment administration will be further simplified after a series of deregulation measures since 2014.

Below are the key revisions in the Draft for Comments:

I. Alleviation of Road Pass

According to NDRC Order 9, a PRC investor who intends to conduct outbound acquisition (including equity acquisition and asset acquisition) or outbound bidding with its investment at or above USD 300 million shall file a “project information report” to NDRC for approval before it carries out any “substantial works” (i.e., executing binding agreement, proposing biding offer, filing application to the foreign authorities, etc.).  If NDRC deems such investment project “in compliance with PRC outbound investment policies”, NDRC will grant a “confirmation letter” (“确认函” in Chinese) to the PRC investor (Article 10).  Otherwise, if the PRC investor carries out substantial works without obtaining the “confirmation letter”, NDRC may circulate a criticism notice against it and order it to seek ratifications.  And, NDRC, in conjunction with other authorities, may impose further punishment against such PRC investor, if its failure to obtain the confirmation letter has a serious nature and has caused serious damage to the state interest (Article 29).

In practice, “confirmation letter” is dubbed as “road-pass”, because such PRC investor may not conduct substantial works without it.

The Draft for Comments alleviate the “road-pass” requirement.  According to Article 10 of Draft for Comments, after a PRC investor files the project information report, NDRC will issue an “acknowledgement letter” (“收悉函” in Chinese) instead of a “confirmation letter”.  Since the Draft for Comments deletes the wording – “complies with PRC outbound investment policies”, we understand that NDRC will only conduct formality review rather than substantive review into the project information report.  The Draft for Comment also does not require the PRC investor to obtain the “acknowledgement letter” before carrying out any substantive works, rather, the PRC investor may carry out substantive works right after it “submits” the project information report (Article 29).  All these proposed revisions change “road-pass” requirement from a substantive process into a formality process.

Alleviation of “road-pass” is a strong message to the market that NDRC is easing the regulation over the outbound investment projects.

II. Relaxation of Sensitive Project Review

According to NDRC Order 9, outbound investment projects involving sensitive state/region or sensitive industry (“Sensitive Projects“) are subject to approval process, while other projects are subject to filing process (Article 7and Article 8).  The Draft for Comments relaxes the approval procedure and document requirements for the approval of Sensitive Projects.

(a) Level: Deletion State Council Approval

According to NDRC Order 9 (including Amendment to NDRC Order 9 launched by NDRC in December, 2014), Sensitive Projects shall be approved by NDRC, among which, Sensitive Projects at or above USD 2 billion shall be preliminarily reviewed and opinioned by NDRC and then be submitted to the State Council for approval (Article 7).  However, NDRC Order 9 is silent on the time limit for State Council’s verification procedure, thus in practice, the State Council approval adds much uncertainty to the project timeline.

The Draft for Comments deletes the State Council approval procedure.  After revision, NDRC itself can approve all Sensitive Projects, in disregard of the monetary value (Article 7).

(b) Document: Removal of Bank Loan Letter of Intent

The Draft for Comment removes the letter of intent for bank loan from the application document list for approval, which simplifies the document preparation process.

To conclude, the Draft for Comment is a further step to simplify PRC outbound administration.  We are looking forward to the final released version, and will keep you updated in this regard.