Outbound unbound?

PRC enterprises proposing routine outbound direct investments in foreign non-financial sectors, and foreign sellers and joint-venture participants, can benefit from the availability of simpler and faster verification procedures of the Ministry of Commerce (Mofcom). Non-routine investments that will not be simpler or faster include those into the energy and mining sectors, and into companies intended to be red-chips (offshore companies that hold PRC subsidiaries, are controlled by PRC investors and are listed on a stock exchange in Hong Kong or a foreign market). Mofcom's related verification procedures will be updated with effect from May 1 2009, under its recently issued Measures for Administration of External Investment (the Mofcom Measures).

    The main effects of the Mofcom Measures, in comparison to previous rules, are the availability of the three-day turnaround of an online application, without supporting documentation, to obtain verification, for a routine small to medium-size investment from Mofcom or from a provincial-level department with authority delegated by Mofcom. The previous rules were Mofcom's Rules on Matters for Verification for Establishment of Enterprises by External Investments, effective from October 1 2004 (the 2004 Mofcom Rules). Another change is the Mofcom Measures' coverage of investments in Hong Kong, Macau and, in principle, Taiwan, none of which were covered by the 2004 Mofcom Rules.

    The full potential benefits of the Mofcom Measures will not be enjoyed unless and until there are similar updates in the policies or practices affecting related reviews that are required from the National Development and Reform Commission (NDRC) and the State Administration of Foreign Exchange (Safe).