NDRC pushes for more power over investment approvals

The National Development and Reform Commission released the Measures for the Administration of the Check and Approval of Foreign-invested Projects (Draft for Comments) 国家发展改革委员会外商投资项目核准管理办法 (征求意见稿), on August 16.

The Commission promulgated the Administration of the Verification of Foreign-invested Projects Tentative Procedures (外商投资项目核准暂行管理办法) eight years ago. Under the draft Measures, reinvestment by foreign-invested enterprises (FIEs) and projects involving foreign invested partnerships are now subject to NDRC approval.

Additional projects

It is unclear, however, in what capacity the NDRC will approve the additional projects. For FIE reinvestment, the draft does not specify which projects need approval. Compared with the Ministry of Commerce (MOFCOM), only projects which fall under the prohibited category of the Foreign Investment Industrial Guidance Catalogue (外商投资产业指导目录) require approval.

“It remains to be seen how the NDRC will implement approvals for FIE reinvestment, especially when the target company is in the permitted or encouraged industries. We will have to wait and see if the NDRC will follow MOFCOM's approach or simply want to capture everything,” said Sun Hong, a partner with Norton Rose in Shanghai.

But Sun warns that the NDRC needs to clarify this point as the present situation is too vague and the NDRC should not be involved in a range of projects covering all industries. It has to withhold from FIE reinvestment projects which are welcoming foreign investments, otherwise it, having the duties of macro-economic control, would be doing more than MOFCOM.

In 2008, the NDRC released Notice 1773, which stated that it should approve FIE reinvestment. The draft Measures seek to formalise the Notice, but have failed to give clear guidance on which types of projects require approval.