State Council, Reform of the Investment System Decision

Promulgated: July 16 2004

Main contents: Section Two of the Decision states that the examination and approval system shall no longer apply to projects invested in and established by enterprises not using government funding. The government will carry out verification only for major fixed asset investment projects and those under the restricted category. For projects within the Investment Projects Subject to Government Verification Catalogue, submission of project application reports shall suffice, and shall not be subject to approval procedures for project proposals, feasibility study reports and work commencement reports. The Investment Projects Subject to Government Verification Catalogue covers 13 categories of investment projects: (1) agriculture, forestry and water conservancy; (2) energy; (3) communications and transportation; (4) information industry; (5) raw materials; (6) machine manufacturing; (7) light industry and tobacco; (8) high and new technology; (9) urban infrastructure; (10) social affairs; (11) finance; (12) foreign investment; and (13) overseas investment (Annex). Under the foreign investment category, projects within the encouraged or permitted category of the Foreign Investment Industrial Guidance Catalogue with total investment (including capital increase) of US$100 million or above shall be subject to verification by the National Development and Reform Commission. Projects within the restricted category of the Foreign Investment Industrial Guidance Catalogue with total investment (including capital increase) of US$50 million or above shall be subject to verification by the National Development and Reform Commission. Establishment of foreign-invested enterprises (and their changes) that are above the limit or restricted for investment as stipulated by the state or that involve quotas or licensing; as well as contracts and articles of association of large-scale foreign investment projects, and major changes specially provided by law (capital increase or reduction, share transfer and mergers), shall be subject to verification by the Ministry of Commerce. Foreign investment projects other than the aforementioned shall be subject to verification by local governments in accordance with the relevant regulations. As for overseas investment, resource exploitation category projects with investment of US$30 million or above by the Chinese parties, and those of a non-resource category involving use of foreign exchange amounting to US$10 million or above by the Chinese parties, shall be subject to verification by the National Development and Reform Commission. Overseas investment projects not mentioned above, and investment projects by enterprises under central administration, shall be reported to the National Development and Reform Commission and Ministry of Commerce for the record. Other enterprise investment projects shall be subject to verification by local governments in accordance with the relevant regulations. Overseas investment and establishment of enterprises (with the exception of financial enterprises) by domestic enterprises shall be subject to verification by the Ministry of Commerce.
  For enterprise investment projects other than those within the Investment Projects Subject to Government Verification Catalogue, a record filing system shall be implemented, and unless otherwise stipulated by the state, enterprises shall report to the local government department in charge of investment for the record according to their geographical locations (Section Two(3)). For government-funded projects that adopt direct investment and capital fund injection methods, only examination and approval of project proposals and feasibility study reports shall be required. Apart for exceptional circumstances, there will be no examination and approval requirements for work commencement reports. Where investment subsidies, on-lent loans or interest subsidies are adopted, only the fund application reports shall be subject to examination and approval (Section Three(4)).
Related legislation: Foreign Investment Industrial Guidance Catalogue (Amended in 2007), Oct 31 2007, CLP 2007 No.10 p22