ISSUE 1 | 2022
46
restrictions on foreign investment and further opening up of prohibited sectors to foreign investors can open up new potential markets for inbound investment. The RCEP agreement can serve as leverage for keeping trade and foreign investment stable in 2022 by expanding exports of Chinese products and speeding up China’s industrial transformation.
would be forbidden from participating in management and their total ownership would be capped at 30%. Furthermore, the China Securities Regulatory Commission proposed in December 2021 that all Chinese companies seeking IPOs and additional share sales abroad would have to register with the securities regulator and complete the relevant compliance procedures. As China has tightened its scrutiny of overseas listings, it is becoming increasingly important for foreign investors to be familiar with the changes and new regulations in China’s business environment and the new market opportunities. New COVID waves like Omicron and the ongoing US-China tensions have already posed unprecedented challenges to foreign investment in China. The Ministry of Commerce expects FDI into China to grow to USD 700bn by 2025 according to its 14th ve-year foreign investment plan released in October 2021, which would only represent an increase of 0.2%. This re ects a more conservative growth target when compared with the previous forecast of a 6.6% growth for the 2016- 2020 period. Nevertheless, the lifting of
the reallocation of foreign direct investment in Asia. Foreign businesses can benefit from building production facilities in lower-cost ASEAN markets and making use of Regional Comprehensive Economic Partnership (RCEP) trade rules and preferences when trading within the region. The RCEP is expected to boost investment opportunities between China and other participating countries as it promotes wider access for foreign investors and increases policy transparency. INCREASED SCRUTINY OVER OFFSHORE SHARE SALES Despite the improved inbound investment actions outlined above, China has recently been tightening scrutiny over offshore sales of shares in Chinese companies in sectors prohibited for foreign investment. It was announced by NDRC and the Ministry of Commerce in December 2021 that all of the restricted Chinese companies, including internet news and publishing, should secure clearance from the relevant Chinese regulatory bodies if they seek share sales and listing in overseas exchange markets. Overseas investors in these companies
KENNETH WONG PRINCIPAL
kennethwong@bdo.com.hk
KENNETH YEO DIRECTOR
kennethyeo@bdo.com.hk
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