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Rule Simplifies Investment Procedures

The Ministry of Commerce Monday issued a rule to streamline its approval procedures for overseas investment by domestic companies, a move to facilitate the country's capital presence overseas.

The rule dramatically reduces the approval procedures for companies who want to invest abroad, thus speeding up their steps of expansion.

The enterprises will only need to submit application materials on five subjects, instead of the current 10 subjects.

Key investment destinations, will also be cut from 30 to seven, which means additional investment only requires the approval of local foreign trade authorities.

Investment in key destinations needs the approval from the ministry.

The ministry also said it will accept applications and issue its approval through the website. Another document indicates the details will be published soon.

The ministry will no longer ask to review companies' feasibility studies of investment and said it is the responsibility of companies to watch their risks.

The new procedures were decided after a two-year pilot in regions including Shandong, Zhejiang, Guangdong, Jiangsu provinces and Shanghai Municipality.

"Based on this step-by-step restructuring, we hope to transform the current approval administration on overseas investment to a registration system," according to a ministry official who declined to be named.

Lu Zhiyong, a professor from the University of International Business and Economics, said the stage of the new system indicated the government's push to gradually reform the current management frame of China's investment overseas.

The old management system which was centered around approval procedures no longer fits the "going out" strategy to create Chinese multinationals proposed by the government in 1999, Lu said.

Coupled with a new appraisal system on overseas investment by domestic companies, the administration is shifting its focus to monitoring.

Chinese companies made overseas direct investments valued at US$2.85 billion in 2003, an increase of 5.5 percent compared with the previous year, the ministry said Monday.

Figures from the communique indicate the amount of direct investment made by Chinese companies accounted for only 0.48 percent of the world's total.

As China edged out the United States for the first time as the largest recipient of foreign direct investment worldwide in 2002, China is also expected to be an important investor, Lu said.

Related authorities, including the ministry and the State Administration of Foreign Exchange, are sticking to relaxing investment procedures as in past years, he said.

Analysts agreed more policy incentives and stronger investing power are fueling China to rise to be a regional investor in Asia.

Some Chinese enterprises, such as PetroChina, Sinopec, home-appliance maker Haier and energy giant Huaneng Group, have set up joint ventures or acquired shareholdings in many countries, including the United States, Australia, the Philippines, Malaysia and Indonesia.

A number of factors have contributed to China's outward investment, he said, elaborating that financial strength and exposure to international business have played a part in encouraging Chinese firms to venture aboard.

"Growing competition at home also encourages Chinese firms to go abroad, adopting a diversification strategy in generating revenues and transferring matured industries to low-income countries," he said.

Such investment is also expected to strengthen enterprises' international competitiveness and create economic incentives and jobs in the receiving countries or regions, Lu said.

(China Daily October 12, 2004)

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