Measures for the Supervision and Administration of Outbound Investments Made by Central Enterprises

　　Order of the State-owned Asset Supervision and Administration Commission of the State Council No.35

　　January 7, 2017

　　The Measures for the Supervision and Administration of Outbound Investments Made by Central Enterprises, which were deliberated and adopted at the chairman's executive meeting of the State-owned Asset Supervision and Administration Commission of the State Council, are hereby promulgated and shall take effect as of the date of promulgation. The Interim Measures for the Supervision and Administration of Overseas Investments by Central Enterprises (Guo Zi Wei Ling No.28) issued in 2012 shall be repealed simultaneously.

　　Xiao Yaqing, Chairman of the State-owned Asset Supervision and Administration Commission of the State Council

　　Measures for the Supervision and Administration of Outbound Investments Made by Central Enterprises

　　Chapter I General Provisions

　　Article 1 These Measures are formulated in accordance with the laws, regulations and documents including the Company Law of the People's Republic of China, the Enterprise State-owned Assets Law of the People's Republic of China, the Guiding Opinions on Deepening State-Owned Enterprise Reform (Zhong Fa [2015] No.22) and the Several Opinions on Reforming and Perfecting the State-owned Asset Management System (Guo Fa [2015] No.63), in order to strengthen the supervision and administration of outbound investments made by central enterprises and help central enterprises improve their capabilities of international operation.

　　Article 2 For the purpose of these Measures, "central enterprises" refer to the state funded enterprises for which the State-owned Asset Supervision and Administration Commission of the State Council ("SASAC") performs the duties of the contributor on behalf of the State Council; "outbound investments" refer to the fixed-assets investments and equity investments made by central enterprises outside the territory of the People's Republic of China; "a major outbound investment project" refers to the outbound investment project of a central enterprise as decided by its board of directors upon discussion in accordance with its articles of association as well as policies and provisions on investment management; and "main business" refers to the main lines of business of a central enterprise as determined in accordance with the development strategy and planning of the central enterprise and published upon confirmation by the SASAC; and "other business" refers to the lines of business other than the main business.

　　Article 3 The SASAC shall, under the principle of strengthening regulation mainly for the purpose of managing capital and with focuses on grasping the investment direction, optimizing the capital layout, rigorously enforcing the decision-making procedures, regulating capital operations, increasing returns on capital and maintaining the safety of capital, establish a supervision and administration system for outbound investments by central enterprises featuring information symmetry, appropriate responsibilities and powers, standard operation and effective risk control according to the law so as to facilitate the more intensified whole-process regulation of outbound investment behaviors in all respects by central enterprises.

　　Article 4 The SASAC instructs central enterprises to establish and improve a policy on outbound investment management to enhance the leading role of their strategies and planning, specify their investment decision-making procedures, regulate their overseas operating activities, strengthen their control of overseas risks and promote innovations in the "going-global" models, develop a negative list of outbound investment projects for central enterprises to carry out classified regulation of outbound investment projects made by central enterprises, supervise and inspect the execution of policies on outbound investment management as well as the decision-making and implementation of major outbound investment projects by central enterprises, organize and conduct post-project evaluation of major outbound investment projects, and investigate the liability for any loss of state-owned assets and other serious adverse effect arising from any unlawful outbound investment.

　　Article 5 Central enterprises are the entities to make decisions, implement and take responsibilities for outbound investment projects. They shall establish a system for outbound investment management, improve their policies on outbound investment management, develop their plans for outbound investments reasonably, compile a negative list of outbound investment projects upon research, effectively enhance the management of overseas projects, improve the capability of prevention and control of outbound investment risks, organize and conduct overseas inspections and audits, and investigate liability according to responsibilities.

　　Article 6 When making an outbound investment, central enterprised shall comply with the following principles:
　　1. Strategic leadership. Central enterprises shall follow their development strategy and international operating planning, continue to focus on their main business, and pay attention to the coordination between domestic and overseas business so as to enhance their innovation capability and international competitiveness.
　　2. Compliance with laws and regulations. Central enterprises shall observe the laws and regulations, business rules and culture-related customs of the People's Republic of China and the relevant host country (region) to achieve compliance in operation and orderly development.
　　3. Appropriate capabilities. The investment scale shall be in proportion to central enterprises' capital strength, financing capability, industrial experience, management level and risk tolerance.
　　4. Reasonable returns. Central enterprises shall follow the concept of value creation, strengthen the demonstration for the investment project, strictly manage the investment process, and increase the investment income so as to preserve and increase the value of state-owned assets.

　　Chapter II Development of the Regulatory System for Outbound Investments

　　Article 7 Central enterprises shall, in accordance with these Measures, establish a sound policy on outbound investment management on the basis of their own actualities. The policy on outbound investment management of central enterprises shall mainly include the following contents:
　　1. the basic principles to be followed for any outbound investment;
　　2. the management process, competent departments and related responsibilities for outbound investments;
　　3. the decision-making procedures, decision-making bodies and their responsibilities for outbound investments;
　　4. the negative-list system for outbound investment projects;
　　5. the system of information-based management of outbound investments;
　　6. the risk management and control system for outbound investments;
　　7. the system for completion, suspension or termination of or withdrawal from outbound investment projects;
　　8. the system for post-project evaluation for outbound investment projects;
　　9. the system for investigation into the liability for unlawful investments; and
　　10. the authorization, supervision and management system for outbound investment activities of any affiliated enterprise.
　　The policy on outbound investment management of central enterprises shall be submitted to the SASAC upon deliberation and approval by central enterprises' board of directors.

　　Article 8 The SASAC and central enterprises shall establish and optimize an investment management information system, improve the informatization of outbound investment management, and use information-based means to achieve full-coverage and dynamic monitoring, and analysis and management of outbound investment projects so as to monitor any risk to be faced by the projects in a real-time manner, give early warnings in time and prevent crises before they emerge. The relevant paper documents and materials submitted by central enterprises to the SASAC in accordance with these Measures shall also be submitted in electronic form via the investment management information system for central enterprises.

　　Article 9 The SASAC shall, according to the relevant provisions and regulatory requirements of the State, create and release a negative list of outbound investment projects for central enterprises to define outbound investment projects prohibited and those subject to special regulation and carry out classified regulation. For any outbound investment project included in the prohibited outbound investment projects in the negative list, central enterprises shall not make any investment; for any outbound investment project included in the outbound investment projects subject to special regulation in the negative list, central enterprises shall report to the SASAC which will perform the examination and decision-making procedures as the contributor; and for any outbound investment project outside the negative list, central enterprises will make decisions by themselves according to their own development strategies and planning. The contents of the negative list of outbound investment projects for central enterprises are relatively stable, and will be subject to dynamic adjustment in due time.
　　Central enterprises shall, on the basis of the negative list of outbound investment projects for central enterprises issued by the SASAC and in light of their own actualities, develop a more stringent and specific negative list of outbound investment projects.

　　Article 10 The SASAC has established and is improving a joint investment regulatory mechanism to play the joint force of strategic planning, legal compliance, financial supervision, property management, assessment and distribution, capital operation, cadre management, supervision by the external board of supervisors, discipline inspection and supervision, audit and inspection and other related regulatory functions so as to achieve whole-process regulation of outbound investment activities of central enterprises, timely detect any investment risk, and reduce investment losses.

　　Chapter III Ex Ante Management for Outbound Investments

　　Article 11 Central enterprises shall, according to the outline of the five-year development plan for central enterprises formulated by the SASAC as well as their own development strategies and planning, set clear planning for international operations, and specify the priority areas, sectors and projects in respect of mid- and long-term international operations. Central enterprises shall, according to their own planning for international operation, develop an annual plan for outbound investments, which shall be included in their annual investment plans and subject to management in accordance with the Measures for the Supervision and Administration of Investments Made by Central Enterprises.

　　Article 12 For any outbound investment project subject to special regulation as set out in the negative list of outbound investment projects for central enterprises, central enterprises shall report such projects to the SASAC for the performance of the examination and decision-making procedures as the contributor after completing its internal decision-making procedures and before submitting the documents to the relevant state department for the first time. Central enterprises shall submit the following materials:
　　1. the report on carrying out the project investment;
　　2. the relevant decision-making documents of the enterprise;
　　3. the feasibility study report (due diligence) and other relevant documents for the project;
　　4. the financing scheme for the project;
　　5. the report on risk prevention and control for the project; and
　　6. other necessary materials.
　　The SASAC performs the examination and decision-making procedures as the contributor in accordance with the relevant laws, regulations and regulatory provisions on state-owned assets and in terms of the project-related risks, equity structure, capital strength, income level, competition order and conditions for withdrawal, and with respect to any objectionable project, send a written opinion back to the relevant enterprises within 20 working days upon receipt of the relevant materials. The SASAC may entrust a third-party consulting institution to demonstrate a project where it deems it necessary.

　　Article 13 Central enterprises shall, according to their development strategies and planning as well as their main business as determined by the SASAC, select and determine outbound investment projects and effectively carry out the research and demonstration for the whole process including financing, investment, management and withdrawal for outbound investment projects. For a new outbound investment project, central enterprises shall, by making full use of professional services provided by domestic and overseas intermediaries, conduct an in-depth feasibility study and demonstration in terms of technology, market, finance and legal affairs so as to make better decisions on outbound investments; in particular, for equity investment projects, central enterprises shall conduct necessary due diligence and perform the asset appraisal or valuation procedures as required.

　　Article 14 No central enterprise is allowed to engage in any investment in other business in principle. Where any central enterprise needs to invest in other business for any special reason, such enterprise shall report to the SASAC for examination and decision-making, and make the investment by means of cooperating with a central enterprise having competitiveness in the said other business.

　　Article 15 Central enterprises shall specify an investment decision-making mechanism, and implement unified management of outbound investment decisions; in principle, the delegation of the decision-making power for outbound investments is not allowed if the authorizer and the authorized are more than two levels apart in terms of the management hierarchy of the relevant enterprise. When making decisions on outbound investment projects, decision-making bodies for outbound investments at all levels shall compile a decision-making document; all personnel involved in the decision-making shall endorse the decision-making document by signing it; and the comments aired shall be recorded for archiving.

　　Chapter IV Interim Management for Outbound Investments

　　Article 16 The SASAC conducts random supervision and inspection of the major outbound investment projects implemented by central enterprises, focuses on examining the decision-making, implementation and effects of the major outbound investment projects of central enterprises, and reminds relevant enterprises of any problem discovered.

　　Article 17 Central enterprises shall regularly track and analyze their outbound investment projects in the process of implementation or operation, and timely carry out the decision-making procedures again in response to any changes in the external environment and the projects. Upon the occurrence of any material adverse change that may affect the realization of the purposes of an investment, the relevant central enterprise shall discuss initiating the suspension, termination or withdrawal mechanism. Where a central enterprise carries out the decision-making procedures for any outbound investment project again, which involves any adjustment to the annual investment plan, the central enterprise shall submit the adjusted annual investment plan to the SASAC.

　　Article 18 Central enterprises shall establish accountability systems for stage evaluation and processing of outbound investment projects so as to evaluate the progress of each stage of major outbound investment projects, discover any problem and make timely adjustments, investigate the liability for any act in violation of any regulation or discipline in respect of the whole process, and strengthen process control.

　　Article 19 Central enterprises shall, as required by the SASAC, submit via the investment management information system for central enterprises the quarterly completion status of outbound investments to the SASAC before the tenth day of the months after the end of the first, second and third quarters of each year, respectively. The information on quarterly completion status of outbound investments mainly includes the completion status of fixed-asset investments, equity investments and major investment projects, as well as other matters to be reported. Central enterprises in certain key industries shall submit quarterly analyses of outbound investments as required.

　　Chapter V Ex Post Management for Outbound Investments

　　Article 20 Central enterprises shall, upon completion of their annual outbound investments, prepare a report on the completion status of their annual outbound investments, and submit the same to the SASAC before January 31 of the following year. A report on the completion status of annual outbound investments shall include but not be limited to the following contents:
　　1. the general information on the completion of their annual outbound investments;
　　2. analysis of the effects of their annual outbound investments;
　　3. information on the progress of their major outbound investment projects;
　　4. information on the post-project evaluation for their annual outbound investments; and
　　5. main problems in their annual outbound investments and suggestions.

　　Article 21 Upon completion of any major outbound investment project, central enterprises shall promptly carry out post-project evaluation and form a special report on the post-project evaluation, through which they will improve their investment decision-making mechanisms, increase the success rate and investment income of the project, and summarize the investment experience to provide reference for follow-up investment activities and improve the level of investment management. The SASAC supervises and directs the post-project evaluation of outbound investments by central enterprises, selects certain major outbound investment projects for post-project evaluation and notifies the evaluation results to the enterprises, and popularizes the useful experience obtained from the implementation of such projects.

　　Article 22 Central enterprises shall normalize the audit of their major outbound investment projects, and the focuses of the audit include the decision-making, investment direction, use of funds, investment income, and investment risk management of their major outbound investment projects.

　　Article 23 The SASAC has established an indicator system for the evaluation of international operations of central enterprises, organizes and conducts annual evaluation of international operations of central enterprises, in which the outbound investment management will be an important part, and regularly reports and issues the evaluation results.

　　Chapter VI Risk Management for Outbound Investments

　　Article 24 Central enterprises shall regard the risk management for outbound investment as an important part of their investment risk management systems. Central enterprises shall strengthen the risk assessment at the early stages of an outbound investment project and the development of a risk control plan, effectively carry out monitoring, early warning and handling of risks in the process of project implementation, prevent any risks in respect of project operation or integration after an investment is made, and provide good arrangements for withdrawal from an investment in terms of time and manner.

　　Article 25 Central enterprises shall actively introduce any state-owned capital investment or operating companies, private investors, or investors in the host countries (regions) or international investors to invest in outbound investments, and exploit the advantages of various investors regarding their knowledge about the projects, stronger capacity to control investment risks, public relations and coordination so as to reduce the risks of outbound investments. In respect of any extraordinarily major outbound investment project, central enterprises shall establish a pre-investment risk evaluation system, and entrust a qualified third-party consulting institution to conduct comprehensive evaluation of risks in terms of the politics, economy, society, culture, market, laws and policies of the host country (region). Any central enterprise under the debt risk control of the SASAC shall not push up its debt ratio for the excuse of any outbound investment.

　　Article 26 Central enterprises shall pay attention to safety risk prevention for their outbound investment projects, enhance their communication with the relevant state departments and the Chinese embassies (consulates), and establish a coordinate, unified, scientific and standard system for safety risk assessment, monitoring and early warning and emergency response so as to effectively prevent and resolve any systematic risk faced by any outbound investment project.

　　Article 27 Central enterprises shall, according to their own risk tolerance capacity, make full use of policy-based export credit insurance and commercial insurance, embed insurance into their risk management systems, and implement co-insurance and reinsurance in accordance with accepted international practices so as to reduce any loss incurred upon the occurrence of any risk.

　　Article 28 Central enterprises shall establish a correct outlook on moral and profit, adhere to the principle of mutual benefit and win-win result, strengthen the development of public relations with the government, media, enterprises, communities and other sectors of the society of the host country (region), actively fulfill its social responsibilities, and pay attention to cross-cultural integration so as to create a good external environment.

　　Chapter VII Liability Investigation

　　Article 29 Where any central enterprise violates these Measures and fails to perform or properly perform its responsibilities regarding investment management, resulting in any loss of state-owned assets or other serious adverse effect, the relevant authority shall investigate the liability of the management personnel of the central enterprise in accordance with the Enterprise State-owned Assets Law of the People's Republic of China, the Opinions of the General Office of the State Council on Establishing the System of Liability Investigation for Unlawful Operation and Investment of State-owned Enterprises (Guo Ban Fa [2016] No.63) and other relevant provisions. Any central enterprise that conceals, lies about or fails to timely submit any investment information shall be subject to a notice of criticism issued by the SASAC.

　　Article 30 Where any relevant SASAC's employee violates these Measures and causes any adverse influence, such employee shall be ordered by the SASAC to make corrections; in the case of any loss of state-owned assets incurred, such employee shall be subject to a sanction imposed by the relevant department according to the authority in respect of cadre management; where any crime is involved, such employee shall be transferred to the relevant judicial organ for handling.

　　Chapter VIII Supplementary Provisions

　　Article 31 These Measures shall be interpreted by the SASAC.

　　Article 32 These Measures shall come into force as of the date of promulgation. The Interim Measures for the Supervision and Administration of Overseas Investments by Central Enterprises (Guo Zi Wei Ling No.28) issued by the SASAC in 2012 shall be repealed simultaneously.