Chinese outbound companies have never been fuelled with so much energy. Richard Li explores how the authorities are supercharging the country’s outbound vehicles.
If China were a racing car, it would be spinning wheels and burning rubber right now in hot pursuit of overseas investment. Recent regulatory changes at the top level have made it much easier for outbound investors to get “go out” permission, and this has enabled their overseas structures to become more powerful vehicles for outbound acquisitions. All this could fuel the economy’s current hot outbound activity.
A combination of several reasons has driven the central government to ignite companies’ outbound ambitions. “As Chinese companies develop, industrial and technological upgrading becomes necessary, while the domestic market has become increasingly saturated – so they need to go out to develop other markets,” observes Charles Guan, managing partner of Grandall Law Firm’s Shanghai office.
“Also, with many years of development Chinese companies have become much more mature, and stronger in international competition. Meanwhile, both the foreign exchange reserves of the country and the capital reserves of the company have now become more sufficient than before.”
After the State Council published a new catalogue on investment approval, both the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) followed suit to revise their mechanisms for the review of outbound investment, putting a full stop to approval requirements for a broad range of investment.