Administrative Approval Reform in China Go back »

Summary

The ongoing Administrative Approval Reform in China is about decentralizing government approval authority for a number of foreign investment projects to local and provincial levels or a simple filing procedure as well as a progressive treatment of many foreign direct investment projects as the same as their domestic counterparts with regard to governmental approval requirements.

The paramount moment here is the State Council’s revision of the Catalogue of Investment Projects Subject to Government Verification and Approval in late 2013. This is a revision of the Catalogue that had been in force since 2004. As such, it should be viewed in light of the Decision of the 3rd Plenary Session of the CPC Central Committee in November 2013 and in particular to the Decision’s statements to liberalise market access for foreign-invested enterprises and to unify laws and regulations for domestic enterprises and foreign-investment enterprises.

Under the 2004 Catalogue, government approval rather than a simple record-filing process was required for:

• Foreign-invested projects; 
• Chinese companies’ overseas investment; and
• Some specific projects for Chinese companies’ domestic investment.

In the revised Catalogue a foreign direct investment will no longer require approval if it is:

• An ‘encouraged’ or ‘permitted’ project under the Foreign Investment Catalogue that is either not required to be controlled by Chinese investors or has a total investment (or capital increase) amount of less than USD 300 million
• A ‘restricted’ project that has a total investment/capital increase of less than USD 50 million.

The European Chamber has strongly advocated these reforms as they wield great benefits for foreign businesses operating in China:

• They remove cumbersome approval requirements which discourage investment in large-scale projects;
• Greater streamlining and transparency in the administrative systems will attract more private investment into relevant industries, as it instils greater business confidence;

The European Chamber believes that by reforming and opening up its administrative approval, China can increase the sustainability of its economic growth while yet further increasing the amount of market-seeking FDI domestically.

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