(Yicai Global) Dec. 28 -- Although the introduction of the US Tax Reform Act has raised concerns about the flow of capital from China to the US and regulatory challenges, China has introduced upgraded foreign investment regulations.
The National Development and Reform Commission released the Administrative Measures on Overseas Investment of Enterprises today, which is in line with a draft from early November. The measures will come into effect on March 1, 2018.
China's non-financial foreign direct investment reached USD107.55 billion in the first 11 months of this year, and USD12.37 billion of that -- representing 3 percent of China's total foreign investment -- went to countries along the Belt and Road.
Mergers and acquisitions activity in the real economy and emerging industries such as the chemical, electric power and robot manufacturing ones has increased, with 52 deals valued at more than USD100 million each taking place this year, per Ministry of Commerce data.
China has worked to contain irrational investment in real estate, sports clubs, entertainment and other sectors.
US tax cuts may be conducive to attracting funds from other countries, including ones from Chinese enterprises, Zhou Liujun, head of the Ministry of Commerce's Department of Outward Investment and Economic Cooperation, told Yicai Global at the National Business Conference on Dec. 26.
Chinese firm's investments will be more prudent and standardized in the new era, Zhou said. Authorities will still support groups with "clear strategies and main businesses" to capture opportunities overseas, he said.
"We are opposed to the transfer of assets overseas," Zhou said. "The strategy should be clear. The enterprises should not abandon their main businesses and strategies to just follow hot trends, such as real estate and sports clubs, which is risky."
China has a huge market, many talented people, sound infrastructure, a complete industrial support system and a supply chain, said Tang Wenhong, head of the Ministry of Commerce's Department of Foreign Investment Administration.
The State Council will issue het Regulations on Overseas Investment, which advocates proposed last year. "Comments have been taken and a preliminary draft was put forward to several departments for research," Zhou said.