Ratification process of foreign projects reformed

China's State Development and Reform Commission promulgated a provisional regime of ratification of foreign investment projects. The document specifies the eligibility of all parties concerned and procedures to go through.

The rules are applicable to Sino-foreign joint ventures, cooperatives and solely foreign funded items, as well as mergers and acquisitions (M&A) and supplementary equity by foreign investors. The authority of ratifying the additional fund is subject to the amount of the newly added investment.

An official with the Commission explained that this system makes difference in three aspects compared with the old one. Firstly, a streamlined ratification system replaces the old approval process which required both a project proposal and a report of feasibility. A concise application for a project is all that is needed.

Secondly, local governments have more power. They are entitled to deal with a 100 million USD, worth of foreign investment project which is encouraged or allowed in China. A decision on an application of a 50 million USD foreign project, if it is in a sector not fully open, can also be made by local authorities which used to be empowered to perform their functions for foreign investment not more than 30 million USD under either condition.

Thirdly, the procedures and deadlines are stated clearly in the document. For projects which are subject to the State Council and the State Development and Reform Commission, the Commission is supposed to either complete the ratification process or submit its results of examination to the State Council within 20 workdays from the day it accepts the application. An extension of 10 workdays is possible if it is allowed.

The official also briefed the eligibility of governments at various levels. The Catalogue of Sectors of Foreign Investment classifies foreign-funded projects into three categories: the encouraged, the allowed and the confined. The power of the administrations at various levels to handle a foreign investment project is based on the amount and the category of the project.

The State Development and Reform Commission is responsible for investments of 100 million USD or above under the encouraged or allowed categories or 50 million USD or above under the confined category. If at least 500 million USD is planned for a project of the encouraged or allowed, or 100 million USD for the confined, the Commission should check the application first and then submit it to the State Council.

Local development and reform commissions manage projects of the encouraged or the allowed which involve less than 100 million USD, as well as those of the confined which are worth not more than 50 million USD.

Provincial governments identify the authority of administrations under the provincial level. However, any project of the confined, even if it needs no more than 50 million USD, is subject to a provincial development and reform commission.

The reform is regarded as a significant step of China's reform on investment system.

By People's Daily Online