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Measures for the Supervision and Administration of Overseas Investments by Central Enterprises

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Measures for the Supervision and Administration of Overseas Investments by Central Enterprises

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Chapter I General Provisions

Article 1 In order to strengthen the supervision and administration of overseas investments by central enterprises, and boost central enterprises to improve the international operation level, these Measures are developed in accordance with the Company Law of the People's Republic of China, the Law of the People's Republic of China on the State-owned Assets of Enterprises, the Guiding Opinions on Deepening the Reform of State-owned Enterprises (No. 22 [2015],CPC Central Committee) and the Several Opinions on Reforming and Improving the Administration System for State-owned Assets (No. 63 [2015], State Council) and other laws and regulations and documents.

Article 2 For the purpose of these Measures,“central enterprises” means the state-funded enterprises for which the State-owned Assets Supervision and Administration Commission of the State Council (hereinafter referred to as the “SASAC”) performs the duties of a capital contributor on behalf of the State Council; “overseas investments” means the fixed asset investments and equity investments made by central enterprises abroad; “major overseas investment projects” means the overseas investment projects deliberated and decided by the boards of directors of central enterprises in accordance with the bylaws of the enterprises and the provisions of the investment administration system; “principal business” means the primary business of enterprises as determined by the development strategies and planning of central enterprises and confirmed and issued by the SASAC; and “non-principal business” means the business other than principal business.

Article 3 The SASAC shall, under the principle ofstrengthening regulation primarily through capital management, and with focus on grasping investment direction, optimizing capital layout, maintaining strict decision-making procedures, regulating capital operation, increasing capital returns, and maintaining capital safety, establish in accordance with the law the supervision and administration system for overseas investments by central enterprises featured by information symmetry,equity in powers and responsibilities, regulated operation and strong risk control, and boost central enterprises to intensify the overall whole-process regulation of overseas investments.

Article 4 The SASAC shall offer guidance to central enterprises so that they could establish and improve the administration system for overseas investments; intensify strategic planning guidance, specify investment decision-making procedures, regulate overseas operations, strengthen overseas risk management and control, and promote the “international presence” model innovations; develop the negative list of overseas investment projects of central enterprises; conductclassified regulation of overseas investment projects of central enterprises; supervise and inspect the implementation of the administration system for overseas investments by central enterprises and the decision-making on and implementation of major overseas investment projects; organize theex post evaluation of major overseas investment projects; and investigate the liabilities of those which make overseas investments in violation of regulations and cause losses to state-owned assets or other serious adverse consequences.

Article 5 Central enterprises are decision-making parties, enforcement parties and responsible parties of overseas investment projects. Central enterprises shall establish the overseas investment administration system, improve the overseas investment administration rules, prepare the overseas investment plans in a scientific manner, research and develop the negative list of overseas investment projects, effectively strengthen the administration of overseas projects, improve the overseas investment risk prevention and control capabilities, organize overseas inspection and auditing, and conduct accountability according to functions.

Article 6 A central enterprise shall make overseas investments under the following principles:

(1) Strategic guidance.The enterprise's development strategies and international operation planning shall be complied with; focus on principal business shall be adhered to; emphasis shall be laid on domestic and overseas business collaboration; and innovation capacity and international competitiveness shall be improved.

(2) Compliance with laws and regulations. The laws and regulations, business rules and cultural custom of China and the countries (regions) where investment is made shall be abided by; operations shall be conducted in compliance with regulations; and orderly development shall be achieved.

(3) Capability matching. Investment scale shall be appropriate for the enterprise's capital strength, financing capacity, industry experience, management level andrisk resistance capacity, among others.

(4) Reasonable return. The concept of value creation shall be followed; investment project demonstration shall be strengthened; investment process management shall be conducted strictly; the return on investment shall be enhanced; and maintenance and appreciation of state-owned assets shall be achieved.

Chapter II Construction of the Overseas Investment Regulatory System

Article 7 Central enterprises shall, in accordance with the provisions of these Measures and in light of the actual circumstances of these enterprises, establish and improve the overseas investment administration system. The overseas investment administration system shall primarily cover the following contents:

(1) The basic principles that shall be followed in overseas investments.

(2) Overseas investment administration process and administrative departments and their relevant functions.

(3) Overseas investment decision-making procedures and decision-making bodies and their functions.

(4) Negative list system for overseas investment projects.

(5) Information technology management system for overseas investments.

(6) Risk management and control system for overseas investments.

(7) Completion, suspension, termination or exit system for overseas investment projects.

(8) Post-evaluation system for overseas investment projects.

(9) Accountability system for investment in violation of regulations.

(10) Authorization, supervision and administration system for the overseas investment activities of affiliated enterprises.

An enterprise's overseas investment administration system shall be submitted to the SASAC after being deliberated and adopted by the board of directors.

Article 8 The SASAC and central enterprises shall establish and optimize the investment administration information system, improve the information technology level of overseas investment administration, achieve the full-coverage dynamic monitoring, analysis and administration of overseas investment projectsbyinformationtechnologymeans, conduct real-time monitoring of risks the projects face, and make early warning in a timely manner, so as to nip risks in the bud. Central enterprises shall, while submitting relevant paper documents and materials to the SASAC in accordance with the provisions of these Measures, submit the electronic versions thereof through the central enterprise investment administration information system.

Article 9 The SASAC shall, in accordance with the relevant provisions and regulatory requirements of the state, establish and issue a negative list of overseas investment projects of central enterprises, and determine the overseas investment projects prohibited and those under special supervision and conduct classified regulation thereof. The overseas investment projects prohibited as listed in the negative list are not allowed to be invested in by central enterprises; the overseas investment projects under special supervision as listed in the negative list shall be submitted by central enterprises to the SASAC for performance of capital contributors' examination and control procedures; and for overseas investment projectsnot listed in the negative list, central enterprises shall make decisions on their own according to enterprise development strategies and planning. The contents of the negative list of overseas investment projects of central enterprises shall be kept relatively stable and be adjusted in a timely and dynamic manner.

Central enterprises shall, on the basis of the negative list of overseas investment projects of central enterprises issued by the SASAC, and in light of the actual circumstances of enterprises, develop more stringent and specific negative lists of overseas investment projects of their own.

Article 10 The SASAC shall establish and improve the investment regulation linkage mechanism, andachieve the synergy of strategic planning, legal compliance, financial supervision, property right management, assessment and distribution, capital operation, cadre administration, supervision by assigned boards of supervisors, discipline inspection and supervision, audit tour and other relevant regulatory functions, so as to achieve the full coverage of the process regulation of overseas investment activities of central enterprises, discover investment risks in a timely manner, and reduce investment losses.

Chapter III Prior Administration of Overseas Investments

Article 11 Central enterprises shall, in accordance with the five-year development planning outlines for central enterprises and enterprise development strategies and planning developed by the SASAC, develop clear international operation planning, and specify the key regions, key fields and key projects in respect of medium and long-term international operation. Central enterprises shall, in accordance with enterprises' international operation planning, prepare the annual overseas investment plans, incorporate them into the enterprises' annual investment plans, and administer them in accordance with the Measures for the Supervision and Administration of Investment of Central Enterprises.

Article 12 Overseas investment projects under special supervision as listed in the negative list of overseas investment projects of central enterprises shall be reported by central enterprises to the SASAC for performance of capital contributors' examination and control procedures after performing enterprises' internal decision-making procedures and before submitting documents to the relevant departments of the state for the first time. Central enterprises shall submit the following materials:

(1) Reports on conducting project investment.

(2) Relevant decision-making documents of enterprises.

(3) Project feasibility study reports (due diligence) and other relevant documents.

(4) Project financing plans.

(5) Project risk prevention and control reports.

(6) Other necessary materials.

The SASAC shall, in accordance with the relevant laws and regulations and the provisions on the regulation of state-owned assets, perform capital contributors' examination and control procedures in terms of project risks, equity structures, capital strength, income level, competition order and exit conditions, among others, and give written opinions on the projects to which objections are raised to enterprises within 20 working days of receipt of relevant materials. The SASAC may, when it deems necessary, authorize third-party consulting institutions to conduct demonstration of projects.

Article 13 Central enterprises shall, according to enterprise development strategies and planning, and on the basis of the principal business confirmed by the SASAC, select and determine overseas investment projects and effectively conduct the research and demonstration of the whole process of the financing, investment, administration and exit of overseas investment projects; and shall conduct feasibility research and demonstration of new overseas investment projects in an in-depth manner in terms of technology, market, finance and law, among others, by fully relying on the professional services of intermediary institutions at home and abroad to improve the quality of overseas investment decision-making, conduct necessary due diligence of equity investment projects thereof, and perform asset appraisal or valuation procedures as required.

Article 14 A central enterprise shall in principle not engage in non-principal business investment abroad. Where any non-principal business investment is necessary for any particular reason, the central enterprise shall submit it to the SASAC for examination and control, and conduct the business in cooperation with the central enterprises with the relevant principal business advantages.

Article 15 A central enterprise shall clarify the investment decision-making mechanism and conduct unified administration of overseas investment decisions, and may not authorize overseas investment decision-making to more than two administrative levels lower of the enterprise. The overseas investment decision-making bodies at all levels shall, when making decisions on overseas investment projects, form decision-making documents which shall be signed and endorsed by all personnel participating in the decision making, and the opinions expressed shall be recorded and archived.

Chapter IV Interim Administration of Overseas Investments

Article 16 The SASAC shall conduct random supervision and inspection of major overseas investment projects being implemented by central enterprises, and focus on inspecting the decision-making on and the implementation and effectiveness of major overseas investment projects, among others, and prompt to enterprises the problems discovered.

Article 17 Central enterprises shall track and analyze on a regular basis the overseas investment projects being implemented and operated, and make decisions again according to the changes in external environment and projects in a timely manner. In case of any material adverse change that affects the achievement of investment purposes, research shall be conducted to initiate the suspension, termination or exit mechanism. Where any annual investment plan adjustment of a central enterprise is involved due to the re-decision-making on any major overseas investment project of the central enterprise, the adjusted annual investment plan shall be submitted to the SASAC.

Article 18 A central enterprise shall establish the phased evaluation and process accountability system for overseas investment projects, and conduct evaluation of the phased progress of major overseas investment projects; and shall, when discovering problems, make adjustments in a timely manner, conduct whole-process accountability for the violations of rules and disciplines, and strengthen process control.

Article 19 A central enterprise shall, in accordance with the requirements of the SASAC, respectively submit the information on the quarterly overseas investment completion to the SASAC through the central enterprise investment administration information system ten days before the next month after the first, the second and the third quarters of each year. The information on the quarterly overseas investment completion mainly includes the completion of fixed asset investment, equity investment and major investment projects and other matters that need to be reported and other contents. Central enterprises in some key industries shall submit as required the quarterly overseas investment analysis information.

Chapter V Ex Post Administration of Overseas Investments

Article 20 A central enterprise shall, after the completion of its annual overseas investments, prepare a report on the annual overseas investment completion, and submit it to the SASAC prior to January 31 of the next year. The report on the annual overseas investment completion includes but is not limited to the following contents:

(1) Overall information on the completion of annual overseas investments.

(2) Analysis on the effect of annual overseas investments.

(3) Progress of major overseas investment projects.

(4) Implementation of the post-evaluation of annual overseas investments.

(5) Main problems existing in annual overseas investments and the suggestions thereon.

Article 21 After the completion of the implementation of a major overseas investment project, a central enterprise shall conduct the post-evaluation thereof in a timely manner and form a special post-evaluation report. It shall, through the post-evaluation of the project, improve enterprise investment decision-making mechanism, enhance the project success rate and return on investment, and summarize investment experience, so as to provide reference for the follow-up investment activities and improve the level of investment administration. The SASAC shall supervise and guide the post evaluation of overseas investment projects of central enterprises, and select some major overseas investment projects to conduct post evaluation , notify enterprises of post evaluation results, and popularize the valuable experience in conducting projects.

Article 22 Central enterprises shall conduct normalized audit of major overseas investment projects, and the focuses of audit shall include the decision-making, investment direction, capital use, return on investment, investment risk management and other aspects of major overseas investment projects.

Article 23 The SASAC shall establish the evaluation indicator system for the international operation of central enterprises, organize the annual evaluation of the international operation of central enterprises, take overseas investment administration as an important content of operation assessment, and report and publish the evaluation results on a regular basis.

Chapter VI Overseas Investment Risk Management

Article 24 Central enterprises shall use overseas investment risk management as an important content of the investment risk management system. They shall strengthen the early-stage risk evaluation of overseas investments and the development of early plans for risk control, effectively conduct the risk monitoring, early warning and disposal of risks in the process of project implementation, prevent the project operation and integration risks after investment, and make effective arrangements for the time points and ways of project exit.

Article 25 The overseas investment projects of central enterprises shall actively introduce the equity investment by state-owned capital investment and operating companies and private investment institutions, local investors and international investment institutions, maximize investors' various advantages, such as being acquainted with project circumstances, having relatively strong investment risk management and control capacities and public relationship coordination abilities, and reduce overseas investment risks. Forthe particularly important overseas investment projects, central enterprises shall establish the risk evaluation system before investment decision-making, and authorize qualified consulting institutions as independent third parties to conduct comprehensive evaluation of risks in the politics, economy, society, culture, market, law and policies, among others, in the countries (regions) where investment is made. The central enterprises incorporated into the debt risk management and control of the SASAC shall not push up the debt ratios of enterprises due to overseas investments.

Article 26 Central enterprises shall attach importance to the prevention of the safety risks of overseas projects, strengthen contact with the relevant departments of the state and Chinese embassies (or consulates) stationed abroad, establish the coordinated, unified, scientific and regulated safety risk evaluation, monitoring and early warning and emergency disposal system, and effectively prevent and respond to the systematic risks the projects face.

Article 27 Central enterprises shall, according to their respective risk tolerance, make full use of the policy export credit insurance and commercial insurance to incorporate insurance into the enterprise risk management mechanism, and implement joint insurance and reinsurance according to the generally accepted international rules, so as to reduce the losses incurred when risks occur.

Article 28 Central enterprises shall establish correct idea of moral and profit, adhere to the principle of mutual benefit and win-win, strengthen the construction of public relationship with the governments, media, enterprises and communities at the countries (regions) where investment is made andall sectors of the society, actively perform their social responsibilities, pay attention to cross-cultural integration, and create a favorable external environment.

Chapter VII Accountability

Article 29 Where a central enterprise, in violation of the provisions of these Measures, fails to perform or to correctly perform its investment administration functions, which causes losses of state-owned assets or any other serious adverse consequence, the relevant department shall, in accordance with the Law of the People's Republic of China on the State-owned Assets of Enterprises, the Opinions of the General Office of the State Council on Establishing the Accountability System for the Illegal Operations and Investments by State-Owned Enterprises (No. 63 [2016], General Office of the State Council) and other relevant provisions, hold the operation and management personnel of the central enterprise accountable. The SASAC shall circulate a notice of criticism on the central enterprises which conceal or falsify or fail to submit in a timely manner the investment information.

Article 30 Where the relevant functionaries of the SASACviolate the provisions of these Measures, resulting in adverse impacts, the SASAC shall order them to take corrective actions; where they cause losses of state-owned assets, the relevant departments shall take disciplinary actions against them according to the cadre administration authorities; or where they are suspected of being criminally punishable, they shall be transferred to the judicial organs for punishments in accordance with the law.

Chapter VIII Supplementary Provisions

Article 31 The power to interpret these Measures shall remain with the SASAC.

Article 32 These Measures shall come into force on the date of issuance. The Interim Measures for the Supervision and Administration of Overseas Investments by Central Enterprises (Order No. 28, SASAC) issued by the SASAC in 2012 shall be repealed concurrently.