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On January 19, the Ministry of Commerce promulgated the "Foreign Investment Law of the People's Republic of China (Draft for Soliciting Opinions)" (hereinafter referred to as "Draft for Comment"), and publicly solicited opinions from the public. This "Draft for Comment" means that the "three foreign laws" (the "Sino-foreign Joint Venture Enterprise Law", "Foreign Enterprise Law" and "Chinese-foreign cooperative enterprise law"), which binds and regulates foreign investment behavior for many years, are being merged and Revised.
The "Draft for Comment" reformed the current foreign investment management system, implemented the management model of "national treatment plus negative list" before the entry, and canceled the case-by-case approval management model established by the previous "three foreign laws."
It is worth noting that for foreign investors, the “Draft for Comment” introduces the “actual control” standard while defining foreign investors according to the registration criteria. Foreign investors are controlled by Chinese investors, and their investment in China can be regarded as investment by Chinese investors.
In the automotive industry, the status of Chinese capital or foreign investment has always been a concern, because it is directly related to the approval of the production qualification of automobile manufacturers. Taking Volvo Car as an example, after it was acquired by Geely Holding Group, in accordance with the relevant provisions of the new "Draft for Comment", it will enjoy the same national treatment for Chinese-funded enterprises in the future.
"The current regulations are still in the process of soliciting opinions. After the official release, there may be adjustments on the existing basis, but the general direction will not change." Recently, the relevant person in charge of the Department of Commerce and Law of the Ministry of Commerce has directed the "Daily Economic News". The reporter said.
Some people believe that the introduction of the "Draft for Comment" will not only release a powerful signal to promote foreign investment, but also enhance the enthusiasm of Chinese auto companies for cross-border mergers and acquisitions and capital export.
The new regulations introduce the concept of “actual control”. In the future, foreign-invested enterprises that are outside the negative list and within a certain amount of investment will not need to go through case-by-case approval. Such foreign capital will enjoy the same approval process as national treatment, and the efficiency of examination and approval. It will also be greatly improved.” The relevant person from the Foreign Investment Department of the Ministry of Commerce recently said in an interview with the “Daily Economic News” that it is different from domestic-funded enterprises. In the past, foreign-invested enterprises will first apply to local businesses in terms of investment approval. The department or the Ministry of Commerce submits an application, and after approval, it will go through the industrial and commercial registration with the approval certificate. This process is usually between 1 and 2 months. This means that after the case-by-case approval is cancelled, most of the foreign capital will no longer experience this link.
While expanding market access and reducing administrative examination and approval, the "Draft for Comment" pays more attention to the supervision and inspection of the business operations of foreign-invested enterprises, and strengthens supervision during and after the event. It clearly states that “foreign investors or foreign-invested enterprises must fulfill their information reporting obligations to foreign investment authorities, regardless of whether they are in the areas specified in the catalogue of special management measures.”
It is worth noting that this “Draft for Comment” defines the concept of “actual control” at the same time as the definition of foreign investors according to the registration criteria: domestic enterprises controlled by foreign investors are regarded as foreign investors; Foreign investors are controlled by Chinese investors, and their investment in China can be regarded as investment by Chinese investors.
Article 18 of Chapter 2 of the Exposure Draft further explains “control”: “directly or indirectly holding more than 50% of the shares, equity, property shares, voting rights or other similar rights of the enterprise”.
This means that some companies will be reclassified under the new defined standards. In the automotive industry, a typical case is that a Volvo car acquired by the Geely Holding Group is considered a “Chinese investor”, but according to the previous foreign-defined criteria, since the Volvo headquarters is located in Sweden, it is Zhejiang Geely. Holding Group Co., Ltd. (hereinafter referred to as Geely Group) was wholly-owned, but did not change its foreign business status.
Previously, foreign business made Volvo domestically quite embarrassing. According to the "Guidance Catalogue for Foreign Investment Industries" issued by the National Development and Reform Commission and the Ministry of Commerce, the automobile manufacturing industry is only encouraged if the proportion of foreign investment is not higher than 50%.
Therefore, Li Shufu, the head of Geely Holding Group, had to adopt the “father-son marriage” model to allow Volvo to enter into a joint venture with its parent company Geely Holding Group. Volvo Cars holds 30% in Daqing and Zhangjiakou factories in China, and Geely Holding Group holds 70 shares. %.
Although Li Shufu puts money from his left pocket into his right pocket, Volvo Car's “outsider status” is still difficult to enjoy the corresponding benefits and conveniences in terms of financial subsidies and approval procedures.
In an interview with the reporter of "Daily Economic News", Zhongshi, an automotive industry analyst, said that at present, the central level of the tax treatment for domestic and foreign-funded enterprises is basically the same, but in the process of market-oriented operation, the differences between domestic and foreign companies have been reflect. “Typical examples, such as the promotion of new energy vehicles, foreign companies cannot enjoy the same financial subsidies as local companies.”
It is still unable to cover taxation, foreign exchange and other policies. It is pointed out that these amendments are not only conducive to promoting foreign investment, but the new defined standards for foreign business identity will further enhance the enthusiasm of Chinese enterprises to implement cross-border mergers and acquisitions.
At the Global Auto Forum held in October last year, Chen Lin, Commercial Counselor of the Department of Foreign Investment and Economic Cooperation of the Ministry of Commerce, pointed out that “through mergers and acquisitions of overseas assets, we can rapidly expand sales scale and narrow the gap with world-class automobile groups. The difficulty of entering overseas markets."
He believes that for Chinese companies, overseas mergers and acquisitions will provide a third development path. In addition to utilizing the established overseas sales channels and customer groups of the acquired objects, it can gain more overseas market share and, more importantly, obtain more well-known brands and more advanced technologies to further promote industrial upgrading.
The state has responded to the policy. According to Chen Lin, in order to promote and promote Chinese enterprises to more actively carry out foreign investment, the Ministry of Commerce has simplified the work process of foreign investment in government approval.
In the "Overseas Investment Management Measures" launched on October 6 last year, the approval process was changed from the original "full approval" to "most of the filing, a small number of sensitive countries and regions, sensitive industries need the approval of the Ministry of Commerce, and the rest Filing. From the time comparison, the approval takes 20 working days, and the filing takes only 3 working days.
According to the latest statistics from the Ministry of Commerce, in 2014, China achieved a total foreign direct investment of US$116 billion, a year-on-year increase of 15.5%; the scale of foreign direct investment and the size of foreign investment attracted by the same period was only US$3.56 billion. This is the first time that China's two-way investment is close to balance.
In contrast, in the automotive industry, following the overseas mergers and acquisitions of SAIC and BAIC Group many years ago, Geely Group acquired Volvo Cars for US$1.8 billion in 2010; in February 2013, Geely Group completed the acquisition of British Manganese Bronze Holdings for 11.04 million pounds. 100% equity of the company. In addition, Dongfeng Motor Corporation has also launched a wave of overseas acquisitions in the past two years. Following the hands of Swedish TEngineering AB and Getrag, in 2012, it completed a 14% equity acquisition of France's largest automobile manufacturing trademark, Citroen, last year. .
As China's auto group grows stronger and stronger and the demand for internationalization continues to strengthen, more companies and capital will go abroad in the future, and the upcoming "Foreign Investment Law" will provide stronger policy support for business operations.
However, as this bill is mainly aimed at corporate investment, the relevant rules need to be improved. "For example, the bill cannot cover taxation and foreign exchange policies, but also requires policy linkages from multiple departments." A related person from the Foreign Investment Department of the Ministry of Commerce told reporters.