Chinese authorities encourage companies to seek outbound direct investment (ODI), but plan to tighten rules and regulations on ODI for speculative purposes, industry insiders recently stated.
The first set of nation-level rules regulating ODI is expected to be issued this year. The rules will remove and integrate some current laws and regulations. They will also clearly define ODI, and explicitly stipulate procedures for approval, entry and exit of investors, financing, taxation, distribution and reinvestment of profits and more.
The rules will additionally clarify which types of ODI are encouraged and prohibited. For instance, the new guidelines will encourage investments that produce positive social and economic benefits or promote projects like the Belt and Road Initiative, industry insiders said. On the other hand, blind and irrational investments will be discouraged and supervised. Investments that violate domestic laws or the laws of destination countries will be prohibited and even punished, an insider told Economic Information Daily.
In recent years, the growth of ODI has surpassed that of absorbed foreign investment in China, analysts pointed out. In 2016, China reported a non-financial ODI of $170 billion, up 54 percent year on year.
As an important component of China's national strategy, China's ODI covers agendas ranging from economic diplomacy to national industry transformation to the cultivation of transnational companies. However, the current rules are not effective, and they fail to sufficiently protect and accelerate outbound investment.
Therefore, news laws and regulations commensurate with the growth of ODI must be introduced, creating sound conditions for Chinese companies hoping to invest their money abroad, analysts said.
