Document Jointly Issued by Six Departments: Private Enterprises Shall Not Transfer Assets through False Overseas Investments

On December 6, 2017, six departments, including NDRC, MOFCOM, PBC, Ministry of Foreign Affairs and ACFIC, issued a department rule: Rules of Conduct for Overseas Investment and Management of Private Enterprises (referred to as Rules hereinafter), which aims at improving the quality and level of “Going out” (overseas investment made by Chinese enterprises).


According to Rules, before making overseas investment, private enterprises shall apply for approval or put on record to the authorities concerned. Under no circumstances should private enterprises commit unlawful conduct, including illegally obtaining foreign exchange, transferring assets or laundering money, through false overseas investment.


Furthermore, while making overseas investment, private enterprises should stick to prudence principle and the principle of independent decision-making and self-financing. Following these two principles, there are several requirements put forward by Rules on private enterprises. First, they should strengthen the management and supervision upon overseas branches regarding transfer of funds or equities, reinvestment and guarantees. Second, environment due diligence is required before acquiring foreign enterprises. Third, if a private enterprise uses a Chinese credit insurance program of a Chinese financial institution, it shall not make any financing or insurance commitment before obtaining the letter of intent issued by the financial institution concerned.


Besides, the principle of fair competition is also highlighted by Rules with no tolerance for commercial bribery. It is strictly forbidden to bribe local public officials, officials of international organizations and related personnel in affiliated enterprises. Collusive bidding, slandering competitors, false propaganda and other means of unfair competition are not allowed either.


Last but not least, according to Rules, private enterprises should also focus on improving innovation capability, core competitiveness and international operation ability.

Editor：Ziyi Tang