Israel: SASAC Brings To A Halt Investments Made By Central Enterprises

Last Updated: 8 May 2017
Article by Shibolet & Co.

If you are raising funds for your business and have recently been in touch with Chinese investors you are probably aware to the new Outbound Direct Investment (ODI) regime in China and the crack down on RMB outflow from China. If you are related to the Chinese arena but have not yet heard of last year end's turmoil, you may find numerous online articles and opinion and media coverage on the subject matter. If you want to read some initial information in Hebrew, click here and here for start.

While the implementation of the new ODI regulations remained unclear during the month in which it was initially exposed, the government has quickly begun to remove the vagueness. Last month, the State-owned Assets Supervision and Administration Commission ("SASAC") has amended and released the Measures for the Supervision and Administration of Investments Made by Central Enterprises and the Measures for the Supervision and Administration of Outbound Investments Made by Central Enterprises (collectively the "Measures"). Both measures came into force as on 7 January 2017. According to the Measures:

SASAC will formulate a Negative List for outbound investment projects by central enterprises, and specify outbound investment projects that are prohibited and subject to special regulation. Central enterprises will not be allowed to invest in ODI projects in industries marked as 'prohibited' under the Negative List. In addition, projects classified as being subject to special regulation by the negative list, shall be submitted by the central enterprises to the SASAC for review and approval. ODI projects outside the scope of the Negative List will be contemplated and decided upon independently by the central enterprise.

In principle, no central enterprise is allowed to engage in any investment which is not directly related to its core business. Where any central enterprise desires to invest in a non-core business for any special reason, such enterprise shall submit to the SASAC for examination and decision-making, an application to approve such non-core investment, and shall make the investment by means of cooperating with a central enterprise having competitiveness in the said business.

The new ODI Regime was initiated late November 2016, when the People's Bank of China issued an internal notice aimed at restricting overseas investments (the Notice). The Notice listed a series of new regulations to prohibit the filing or approval of overseas investment projects and thereafter MOFCOM has published in its website the new working procedures for the review of ODI projects, however, the above Measures are the first official legislation, enacted in order to implement the Notice. These Measures cover ODI projects led by Central Enterprises, that is, State Owned Entities (SOE) directly related to the NDRC. Those SOEs which are controlled by the local DRCs are not covered by the Measures and their ability to engage in outbound investments is governed by the specific province of their domicile.

The Negative List is yet to be issued and so is the detailed process for the approval or filing of the special overseas investment projects made by central enterprises.

STATE COUNCIL INTRODUCES 20 POLICIES ON ATTRACTING FOREIGN INVESTMENT

While the government sets new rules to regulate ODI and avoid uncontrolled outflow of RMB from China, it also takes measures to encourage Foreign Direct Investments into Mainland. On January 12, the State Council issued the Notice of the Several Measures for Opening Wider to the Outside World and Making Active Use of Foreign Investment (" Notice").

In order to promote FDI and attract new investments in China, and based on the Notice, MOFCOM and NDRC are now amending the Investment Catalogue to further relax the restrictions on foreign investment. The current Investment Catalogue was lastly amended in 2015. The newly drafted Catalog will remove another layer of restrictions and obstacle from the long access way to the PRC and enhance the opening up (for example, the new catalog will reduce the prohibited industries from 93 in 2015 to only 62 today). Highlights of the Notice as are follows:

The Notice emphasizes the need to further expand the opening-up, to create a market environment of fair competition and to redouble efforts to attract foreign investment. The Notice clearly states that the Catalogue of Foreign Investment will be amended to relax the restrictions imposed on the foreign access to various sectors including inter alia the service sector, the manufacturing sector and the mining sector. The government is now gathering public comments in order to finalize the amended Catalogue.

With respect to the service sector, focus will be put on relaxing limitations on foreign access to banking financial institutions, securities companies, securities investment fund management companies, futures companies, insurance institutions and insurance agencies, while the limits on foreign access to accounting, auditing, architectural design, rating service and other fields will be lifted. Further, telecommunications, internet, culture, education, and transportation sectors will be opened up gradually.

As to the manufacturing sector, emphasis will be put on eliminating restrictions previously imposed on foreign access to the manufacturing of railway transportation equipment, manufacturing of motorcycles, production of fuel ethanol, processing of grease and other fields.

NDRC CLARIFIES THE AUTHORITY TO APPROVE FOREIGN INVESTED PROJECTS

Last year, the Chinese government reformed the administration of record-filing for the establishment of, and change to, foreign invested enterprises (FIE). Under the new regime, FDI projects that do not fall within a Negative List only require a record-filing procedure through MOFCOM's online system before the registration, or as late as 30 days after the registration at the local Administration of Industry and Commerce (AIC). Under this regime, foreign investors were not required to manually approach MOFCOM and apply for the approval of a certain project which is not covered by the Negative List. This has definitely expanded the foreign economic cooperation and technological exchange and shortened the setup time of FIEs.

For foreign investment projects subject to the approval of the National Development and Reform Commission (NDRC), NDRC is determined to further delegate its approving authority in order to adhere to the ongoing trend of further relaxing the restrictions on foreign investments. As such, NDRC has recently issued the Notice on Properly Performing Relevant Foreign Investment Work for Effective Implementation of the Catalogue of Investment Projects Subject to Government Verification and Approval (2016 Version) ("Circular"). According to the Circular, less and less foreign investment projects will be subject to the approval of the central government:

The Circular clearly states that any project in the restricted industries of the Catalogue for the Guidance of Foreign Investment Industries (the " Catalogue") with a total investment amount (including capital increase) of USD 300 million or above shall be examined and approved by the NDRC, while projects with a total amount of USD 2 billion or above shall be submitted to the State Council for the record. The restricted industries in the Catalogue includes, inter alia, printing of publications, smelting and separation of rear earth, manufacturing of automobile whole vehicles, special use vehicles and motorcycles, telecommunications, etc; It should be noted that previously, even projects in encouraged industries (with total amount exceeding USD 300 million) required the approval of NDRC, however, it can be drawn that pursuant to the new Circular, the Development and Reform Commission will no longer require to review and approve projects within those industries defined as encouraged.

Other projects in the restricted industries of the Catalogue which are invested with a total amount of less than USD 300 million shall be examined and approved by the provincial government.

SAFE ISSUES NOTICE ON FURTHER PROMOTING FOREIGN EXCHANGE ADMINISTRATION REFORMS AND IMPROVING AUTHENTICITY AND COMPLIANCE

The State Administration of Foreign Exchange (SAFE) issued the Notice on Further Pushing Forward Foreign Exchange Administration Reforms and Improving Authenticity and Compliance Review on Jan 26, 2017 (" Notice"). The Notice sets out 9 measures revolving around the following three priories:

Deepening reforms to enhance trade and investment facilitation, such as expanding the scope of foreign exchange settlement in foreign exchange loans, foreign accounts of overseas institutions in the Free Trade Zone can handle the foreign exchange settlement ;

Improving administration by tightening authenticity and compliance reviews, such as specifying the document list of foreign exchange profits export business which is more than USD 50 thousand;

Strengthening statistical operations, incorporating local and foreign currency administration.

(source: WestLawChina)

CENTRALIZED CUSTODY OF CUSTOMER DEPOSIT RESERVES OF PAYMENT INSTITUTIONS

Along with the rapid development of the online shopping, online payment and mobile payment have become the most popular and common way of payment in China. An increasing amount of offline stores have joined the trend, and gradually expand the use of mobile wallets via payment apps, such as Alipay of Wechat, as a main method of payment, in order to encourage and facilitate consumption.

In several metropolises like Beijing and Shanghai, you can actually leave your house for shopping without a wallet, knowing that your fun shopping plans will not become a frustrating window-shopping experience. You can go shopping without any traditional mean of payment, while using the payment apps in your cellphone to pay the bills. In order to pay the bills, you will recharge the money in your personal account in the payment apps or simply link the mobile app directly to your bank account.

If you – like many other consumers – are no longer a fan of brick and mortar shopping, you are probably using various online shopping arenas e.g. Taobao (the biggest online shopping platform, like eBay), as your main venue of your shopping sprees. When you purchase via Taobao and pay the money to the seller, before you receive the ordered goods, your money is held in an Alipay account. Once you confirm receipt of the goods, Alipay will release the money to the seller. The money put in Alipay or other payment apps is called 'customer deposit reserves'. The total amount of such reserves is enormous. By the end of 2016, the amount of customer deposit reserves deposited in 267 payment institutions in China, was more than RMB 500 billion. (Data resource: http://finance.ifethe ng.com/a/20170116/15147786_0.shtml).

As the government is concerned of the risk inherent in such customers deposit reserves (e.g. the ease of diverting the reserves to pay other debts, to invest or otherwise use the funds for purposes other than to the matter it was paid for), the People's Bank of China (PBC) has issued the Notice on Matters Concerning Centralized Custody of Customer Deposit Reserves of Payment Institutions on Jan 13, 2017 (" Notice") to regulate the management of the customer deposit reserves.

According to the Notice, as of April 17 2017, payment institutions should transfer customer deposit reserves collected according to the stipulated percentage, into designated corporate deposit accounts; no interest will be accrued on funds deposited in these accounts for the time being.

The PBC will determine the customer reserve rates of payment institutions according to the types of businesses they operate and their latest classification; customer reserve rates shall be subject to adjustment if deemed necessary by the PBC.

The amount of customer reserve payable by a payment institution will be calculated based on the average daily balance in the previous quarter and the customer reserve rate specified for the institution, and will be reviewed on a quarterly basis.

TRADEMARK REVIEW AND EXAMINATION CRITERIA HAS BEEN ENRICHED

On Jan 4, 2017, the State Administration for Industry and Commerce (SAIC) has issued the amended Trademark Review and Examination Criteria. To better implement the Trademark Law, a set of new criteria was released, which includes the following:

Audio trademark review criteria: The audio trademark is divided into two forms: music and non-music; the music trademark shall be described by stave or numbered musical notation and the non-music trademark shall be described by text; it shall not be identical or similar to national anthems, military songs or international songs

Application for a registered trademark which is cancelled or declared invalid: the application of the trademark which is identical or similar with such cancelled trademark will be rejected during one year after its cancellation.

Stakeholder identification: the following person can be deemed as the stakeholder of the prior trademark right: the licensee of the prior trademark right, the legal successor of the prior trademark right, and the pledgee of the prior trademark right.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions