Tighter regulation for SOEs’ overseas investment
May 15, 2017 Category Foreign investment, Weekly
Chinese authorities plan to introduce an improved, rigorous system of auditing overseas investment by state-owned enterprises (SOEs). If necessary, regulators will go overseas for on-site verification and evidence collection. The purpose is to counter irrational speculation, illegal transfer of assets, and fake transactions, which disrupt China’s foreign exchange and financial markets. SOEs have invested in more than 150 countries and regions with over CNY5 trillion in overseas assets, but compared with foreign multinationals, Chinese SOEs lack experience in overseas operations and risk control. Chinese authorities have set stricter rules and advised companies to make their investment decisions more carefully. Since the beginning of 2017, the State-owned Assets Supervision and Administration Commission (SASAC) has introduced negative lists and designated investment redlines for both domestic and overseas investment by SOEs. “There is no doubt that a more comprehensive and stringent auditing system will help standardize China’s overseas investment and contribute to maintaining and increasing the value of state-owned assets,” said Li Jin, Chief Researcher at the China Enterprise Research Institute. China’s outbound direct investment (ODI) plunged by 64% year-on-year to USD20.9 billion in the first quarter, mainly due to stricter oversight. Last year, China’s ODI surged over 40% from a year earlier, the Shanghai Daily reports.
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