28 March 2018

On 1 March 2018, the Administration Measures for Enterprise Outbound Investments (“Order No. 11”) came into force. Order No. 11 was issued by the National Development and Reform Commission of the People’s Republic of China (“NDRC”) on 26 December 2017. It replaces the NDRC Administration Measures for the Approval and Filing of Outbound Investments (“Order No. 9”).

Order No. 11 applies to all outbound investment activities by PRC enterprises directly (“Direct Investments”) or through overseas entities controlled by them (“Indirect Investments”), in which they invest assets or interests or provide financing or a guarantee. Indirect Investments will be regulated as Direct Investments if the PRC enterprises provide financing or guarantee in the investments. These investment activities include:

  • obtaining land title or land use rights;
  • acquiring the right of exploitation and development of natural resources;
  • obtaining the ownership or operational rights of infrastructure, enterprises or assets;
  • the construction or re-construction of fixed assets;
  • setting up a new company or increasing the capital of an existing company;
  • setting up or participating in offshore equity investment funds; and
  • controlling an offshore enterprise or asset through an agreement or a trust.

Elimination of “road pass” regime

A key feature of Order No. 11 is the elimination of the “road pass” regime found in Order No. 9. Under the “road pass” regime, investors involved in outbound acquisitions or bidding transactions which reached or exceeded US$300 million had to obtain a confirmation letter from the NDRC before making a binding offer. The elimination of the “road pass” regime will likely reduce time costs and provide more certainty for investors.

Verification or filing no longer a condition for effectiveness of investment agreements

Under Order No. 9, the NDRC’s issuance of verification approval documents or record-filing notices was a condition for investment agreements to become effective. Under Order No. 11, verification or filing can be a closing condition, but need no longer be a condition for the effectiveness of investment agreements. These changes bring the law in line with market practice, in which government approval is usually a closing condition but failure to obtain approval does not affect the contract’s validity.

Types of projects subject to verification or filing procedure

Under Order No. 11, sensitive projects are subject to a verification procedure, and all non-sensitive projects are not subject to such verification procedure. In the case of non-sensitive projects, Direct Investments are subject to NDRC filing procedure, whereas, Indirect Investments need to be reported to the NDRC online where the investment amount is US$300 million or more. An Indirect Investment in non-sensitive projects in the amount less than US$300 million triggers no NDRC procedure.

A “sensitive project” is defined to mean a project involving a sensitive country or region, or a project involving a sensitive industry. Sensitive countries and regions include those:

  • without diplomatic relations with China;
  • experiencing war or internal strife;
  • where investment by the enterprise is restricted by international treaties or agreements that China has concluded or acceded to; or
  • other sensitive countries or regions.

The NDRC issued the Sensitive Industry Catalogue for Outbound Investments (2018) on 31 January 2018, which came into effect on 1 March 2018. It stipulates that sensitive industries include:

  • the research, manufacturing or repair of weaponry;
  • the development or utilisation of cross-border water resources;
  • the news media;
  • real property, hotel, cinema, entertainment and sports club; and
  • formation of equity investment funds or investment platforms without specific industrial projects.


Order No. 11 represents a more detailed and refined regulatory regime, providing PRC outbound investments with more certainty, transparency and efficiency. With it coming into effect, the market would expect more robust PRC outbound investment activities.


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