New NDRC Regulatory Measures on Outbound Investment Effective May 8, 2014

by Davis Wright Tremaine LLP

On April 8, 2014, the National Development and Reform Commission (“NDRC”), a ministry-level authority under the State Council responsible for the administration of domestic investment in China and outbound investment out of China, issued Administrative Measures for the Verification and Approval and Filing of Outbound Investment Projects (“2014 Outbound Investment Measures”), replacing the Interim Measures for the Administration of Verification and Approval of Outbound Investment Projects promulgated in October 2004 (“Interim Outbound Investment Measures”).

The 2014 Outbound Investment Measures, which took effect on May 8, 2014, simplify the approval process for investments outside of China by Chinese investors. The measures reduce the scope of verification and approval requirement and provide specific timelines for each step in the application process. Consequently, it should be easier for Chinese companies to obtain authorization to enter into outbound investment projects.

NDRC authorization is a pre-requisite for the approvals required from the Ministry of Commerce (“MOFCOM”). NDRC’s 2014 Outbound Investment Measures likely will necessitate a change of MOFCOM’s regulatory measures on outbound investment. We also note that, on Jan. 24, 2014, the State Administration of Foreign Exchange (“SAFE”) released its Notice Concerning Further Improvement and Adjustment of the Administrative Policies on Foreign Exchange under Capital Accounts. These new SAFE rules took effect on Feb. 10, 2014 and are intended to facilitate the process for obtaining foreign exchange to fund outbound investment. 

No classification of projects for particular purpose
The Interim Outbound Investment Measures divided outbound investment projects into two categories according to their purpose: (i) projects for the purpose of exploring and exploiting crude oil, mines, and other resources (“Projects for Resources Development”) and (ii) projects for other purposes (“Other Projects”). Depending on the amount of the investment, the level of approval authority would be different, ranging from provincial NDRC to the State Council. Generally speaking, the Interim Outbound Investment Measures imposed stricter requirements on Other Projects. 

Under the 2014 Outbound Investment Measures, the division of projects according to their investment purpose is abolished and all outbound investment projects are treated equally.

Verification and approval vs. filing
Under the Interim Outbound Investment Measures, only projects invested by enterprises managed by the central government1 could be exempted from verification and approval requirement and eligible for the simpler alternative filing process.

The 2014 Outbound Investment Measures expand eligibility for alternative filing procedures beyond companies managed by the central government. They provide that:

  • A project with a total amount of Chinese investment2 of USD 1 billion or more should be verified and approved by NDRC;
  • A project that involves sensitive countries and regions3 or sensitive industries4 should be verified and approved by NDRC, regardless of the total amount of Chinese investment;
  • A project that (i) involves sensitive countries and regions or sensitive industries, and (ii) has a total amount of Chinese investment of USD 2 billion or more should be reviewed by NDRC and then verified and approved by the State Council; and
  • A project other than those mentioned above need only be filed with NDRC or its provincial counterparts (depending on the total investment amount and whether the investment is made by enterprises managed by the central government). 

The details are as follows:


Verification and approval by

Filed with

Chinese investment = USD 1 billion


Not Applicable

Involving sensitive countries/regions or sensitive industries


Not Applicable

Chinese investment = USD 2 billion and involving sensitive countries/regions or sensitive industries

State Council

Not Applicable

Investment made by enterprises managed by the central government

Not Applicable


Investment made by enterprises other than those managed by the central government, USD 300 million ? Chinese investment < USD 1 billion, and without involving sensitive countries/regions or sensitive industries

Not Applicable


Investment made by enterprises other than those managed by the central government, Chinese investment < USD 300 million, and without involving sensitive countries/regions or sensitive industries

Not Applicable

Provincial NDRC

The Interim Outbound Investment Measures provided timelines for some approval steps, but those timelines did not cover the entire process. For example, the Interim Outbound Investment Measures did not specify within how many days the NDRC had to seek relevant authorities’ opinions when the project involved sensitive countries or regions. The absence of mandatory times for response allowed NDRC to exercise discretion, and delay the approval process. Some companies had to wait a long time to get the final result.

The 2014 Outbound Investment Measures provide timelines for each approval step. For example, NDRC must consult relevant authorities within three working days if the project involves sensitive countries or regions, and NDRC must complete the verification within 20 working days after receipt of the application documents. The timeline for reviewing the filing application is even shorter. NDRC needs to issue the filing result within seven working days after its receipt of the filing application. Such definite timelines should help reduce uncertainty and shorten the entire period needed for approval or filing.

Preliminary reporting requirement

Project Information Report
The 2014 Outbound Investment Measures provide that a Chinese company must submit the Project Information Report to NDRC before it initiates any substantive work, if the contemplated project is an acquisition or bidding project with a total Chinese investment of more than USD 300 million. NDRC should issue a confirmation letter within seven working days of its receipt of such Project Information Report. Without a confirmation letter, the company is not allowed to carry out any substantive work; otherwise, it will be subject to administrative penalties. Under the 2014 Outbound Investment Measures, “substantive work” refers to (i) signing a binding agreement, or submitting binding quotations and submitting applications to a foreign government, if it is an acquisition project, or (ii) formally submitting bidding documents, if it is a bidding project.

The Interim Outbound Investment Measures had similar requirements. However, there was no concept of “substantive work,” which implied that Chinese investors were not allowed to engage in any activities before obtaining the confirmation letter. In addition, the threshold for the reporting requirement under the Interim Outbound Investment Measure was USD 100 million5. The 2014 Outbound Investment Measures significantly increase the threshold to USD 300 million and thus exempt many projects from such reporting requirements. 

However, the reporting requirements, while allowing NDRC to be informed of the planned projects as soon as possible, impose additional burdens on Chinese investors and also cause more uncertainties. Under the 2014 Outbound Investment Measures, it seemed that all acquisition and bidding projects that exceeded the threshold investment amount should be reported, regardless of whether they were subject to a filing requirement or a verification and approval requirement. In addition, according to a notice released by NDRC in 2009, the confirmation letter issued by NDRC for the Project Information Report was a pre-condition for the application for the verification and approval or the filing. Therefore, it appeared that the government had the discretion to veto a project even before the application for verification and approval or filing was submitted. 

Practical implications
The Project Information Report is devised to prevent Chinese companies from unreasonably increasing the acquisition or bidding price in winning an acquisition or bidding project. However, it is widely viewed by foreign governments as the Chinese’s government’s intervention in the free market. 

A recent example involved RDA Microelectronics Inc. (“RDA”), a fabless semiconductor company listed on NASDAQ. In September 2013, Shanghai Pudong Science and Technology Investment Co., Ltd. (“SPSTI”), a company registered in Shanghai, made a tender offer to take RDA private at the total price of USD 745 million. Later in the same year, Unisplendour Corporation Limited (“UNIS”), a company registered in Beijing, also made a tender offer to privatize RDA with a higher price of USD 910 million in total. The shareholders of RDA accepted UNIS’ tender offer and approved the acquisition agreement with UNIS in December 2013. SPSTI had reported this project to NDRC and obtained the confirmation letter, while UNIS so far has not obtained the confirmation letter. It is unclear whether, without NDRC’s confirmation letter, UNIS can move forward with the acquisition. It is reported that if the acquisition by UNIS is vetoed by NDRC, RDA may face class action litigation by shareholders in United States. Under its agreement, UNIS may also be liable to compensate RDA in the amount of RMB 450 million.

Pre-filing or post-filing

The 2014 Outbound Investment Measures provide that:

  • Without obtaining the approval document or the filing notice, a company cannot apply to other relevant government authorities for the outbound investment project; and
  • Before entering into any binding investment agreement, the company must get the approval document or the filing notice, or at least the effectiveness of the agreement should be expressly conditioned on the grant of the approval document or the filing notice.

Therefore, the filing, although it requires fewer documents and a shorter review period, may have the same practical effect as a verification and approval requirement rather than a true post-filing process which only notifies the government after the investment is made. With the power to turn down a filed application, the government still appears to have the discretion to veto any project, even if it is only required to be filed with NDRC under the 2014 Outbound Investment Measures. It remains to be seen how NDRC will exercise this discretion.

MOFCOM Measures on Outbound Investment
In addition to NDRC, MOFCOM issued Administration Measures on Outbound Investment in 2009 (“MOFCOM Measures”), which provide that all outbound investment projects are subject to MOFCOM or its provincial counterparts’ verification and approval.

With the promulgation of the 2014 Outbound Investment Measures, in April 2014, MOFCOM released an amended version of the MOFCOM Measures for public comments (“Draft MOFCOM Measures”). The Draft MOFCOM Measures are intended to develop a new regulatory mechanism for outbound investment consistent with the 2014 Outbound Investment Measures. 

Unlike NDRC’s relatively conservative approach, MOFCOM takes further steps in liberalizing regulatory measures. Under the Draft MOFCOM Measures, the verification and approval requirement is applicable only to projects involving sensitive countries/regions or sensitive industries, and all other projects need only be filed with the government, regardless of the total investment amount. In addition, a reporting requirement similar to the Project Information Report is abolished in the Draft MOFCOM Measures.

However, before the Draft MOFCOM Measures are formally issued, it is not clear in what form these liberalized measures will be adopted.

1 According to the Interim Measures for the Supervision and Administration of Outbound Investment of Central Enterprises, “enterprises managed by the central government” refers to enterprises directly owned and managed by the State-owned Assets Supervision and Administration Commission (“SASAC”), which are the biggest state-owned companies in China.
2 According to the 2014 Outbound Investment Measures, “Chinese investment” refers to any cash, kind, intellectual property or other benefits contributed by Chinese investors.
3 According to the 2014 Outbound Investment Measures, “sensitive countries and regions” include (i) countries with no diplomatic relations with China, (ii) countries subject to international sanctions, and (iii) countries and regions affected by wars, civil strife, etc.
4 According to the 2014 Outbound Investment Measures, “sensitive industries” include (i) basic telecommunications operations, (ii) cross-border development and utilization of water resources, (iii) large-scale land development, (iv) main power transmission lines and power grids, and (v) news media, etc.
5 The Interim Outbound Investment Measures do not provide such threshold, which was later specified in a notice issued by NDRC in 2011 for the implementation of such measures. 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Davis Wright Tremaine LLP | Attorney Advertising

Written by:

Davis Wright Tremaine LLP

Davis Wright Tremaine LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.