SHANGHAI, Jan 8 (Reuters) – China’s Ministry of Commerce may ask Chinese companies to seek ministry approval if they want to invest $100 million or more overseas, it said in draft rules, after a few major Chinese companies reported big book losses on investments abroad.
Companies may also need the ministry’s approval if they want to invest in countries that have no diplomatic relations with China, foreign infrastructure projects or highly risky countries or regions, it said in rules that were published late on Wednesday, seeking public feedback until Jan. 20.
“The regulations are drawn up to promote and regulate the development of overseas investments,” the ministry said in a statement on its website, www.mofcom.gov.cn, adding that the new rules would replace the existing ones promulgated in 2004.
In an apparent shift of policy to stress supervision, the draft rules deleted an existing provision that said: “The state supports and encourage companies with various sorts of advantages and ownerships to go abroad to invest and establish new firms.”
Existing rules require China’s central government-controlled companies to apply for the ministry’s approval if they want to invest overseas, while other firms need only ask for the permission of the ministry’s provincial bureaus.
These rules do not restrict applications by any monetary threshold.
The ministry said the new rules would take effect after their formal publication, but it did not say when this would happen. However, Chinese authorities typically issue new rules within a month after seeking public feedback.
Among other requirements, the draft rules said non-central government firms that would invest $10 million to no more than $100 million could apply for approval from the ministry’s provincial bureaus.
Hit by the global financial crisis, China’s second biggest insurer, Ping An Insurance (Group) (2318.HK)(601318.SS), booked a loss of about 15.7 billion yuan ($2.3 billion) on its investment in Fortis NV (FOR.BR) (FOR.AS), among other similar cases.
The country’s $200 billion sovereign wealth fund, the China Investment Corp (CIC), has suffered heavy paper losses on its high-profile stakes in U.S. private equity firm Blackstone Group (BX.N) and bank Morgan Stanley (MS.N). ($1=6.834 Yuan) (Reporting by Lu Jianxin; Editing by Ken Wills)