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China Formalizes Restrictions on Overseas Investment

By Xinyi McKinny

On August 18th 2017, China’s State Council released new guidelines to regulate China’s overseas investments. Since the last quarter of 2016, China has signaled plans to curb Chinese firms’ investment in foreign assets, after revealing that companies from China are spending far too much on foreign soil. This is the first published official guidance to regulate China’s overseas investment.

  • To reduce Chinese businesses oversea investment risk.
  • To promote healthy growth of overseas investment.
  • To drive the output of China’s products, technology and services, in order to meet the needs of national economic and social development in China.
  • To manage foreign exchange reserves and stabilize the value of the Chinese currency.
  • To deepen cooperation with countries involved in the Belt and Road Initiative.

  • Three categories of overseas investments are established: supported, restricted and prohibited.
  • Investments can lead to export China’s technology and equipment, upgrade the nation’s research and manufacturing ability, and make up the shortage of energy and resources that are supported.
  • Investments in real estate, hotels and entertainment are restricted.
  • The establishment of equity-investment funds and any investment platforms that aren’t linked to a specific project are restricted.
  • There is no specific value thresholds for any of the categories.

  • Only the qualified investors would be able to invest overseas.
  • Due diligence will be enhanced in order to reduce the investment risk, as well as more balanced asset allocations.
  • R&D facilities and incubator space will receive additional capital allocation.

 

  • Government statistics indicate the crackdown has already sent China’s foreign direct  investment down over 40% this year.
  • During the first half of 2017, the total capital outflow from China was $15.82 billion, compared with $23.42 billion in 2016 H1. The money flow into the US dropped to 25% due to the limited investment opportunities and strong dollar.

 

If interested in seeing the last five years of Chinese investment activity, please download either the English or Chinese version below.

As the Senior Managing Director for China Direct Investment, Xinyi is a licensed architect who has managed the full implementation lifecycle from pre-design to substantial completion work, including planning, schematic design, construction document development, consultant coordination and construction administration.

Xinyi completed her advanced studies in Real Estate at the University of California, Berkeley, and is a graduate of the Masters of Business Administration program (MBA).  She is a LEED Accredited Professional since 2008. As a nationally recognized Thought Leader, she appears frequently in numerous publications , including Forbes, Bisnow, The San Francisco Business Journal, The Registry, Connect Media, Blau Journal and others.  Xinyi is fluent in English and Chinese.

 

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