Reinvestment of Overseas Chinese-funded Enterprise
As defined by the Ministry of Commerce (MOFCOM) of the PRC, reinvestment of overseas Chinese-funded enterprise refers to the overseas investment made by an overseas destination enterprise that have already completed overseas direct investment (ODI) approval or filing procedures, using its operating profits or self-raised funds from overseas (e.g., loans from overseas banks). For the above reinvestment, the MOFCOM only requires a post-reporting. Additional ODI approval or filing procedures are not required. The Chinese domestic enterprise shall report the basic information of the reinvestment to the MOFCOM after the completion of the overseas legal procedures.
While according to the National Development and Reform Commission (NDRC) of the PRC, ODI approval procedures are required for all sensitive projects conducted by Chinese domestic enterprises through their controlled oversea enterprises, regardless of whether or not the Chinese domestic enterprise provide financing or guarantee to such projects. If sensitive projects are not involved, it can be divided into two situations: (1) ODI filing procedures are required if the Chinese domestic enterprises directly provide assets, interests, financing or guarantee to the projects; (2) No involvement of domestic assets or interests or provision of financing or guarantee from the Chinese domestic enterprises, the Chinese domestic enterprise shall submit a Situation Report for Non-sensitive Project with Large Amount to the NDRC before the implementation of the projects if the investment amount of Chinese investors is USD300 million or above; if the investment amount of Chinese investors is less than USD300 million, there is no reporting requirement.
The foreign exchange registration for overseas reinvestment has already been cancelled by the State Administration of Foreign Exchange of the PRC since 1 June 2015. That is to say, foreign exchange registration is not required for the overseas reinvestment made by overseas Chinese-funded enterprises.
In conclusion, if the reinvestment funds using by the Chinese-funded enterprise are originated from the domestic enterprise (e.g., through capital increase or lending), the investment will be regarded as an overseas investment made by the domestic enterprise, which shall be subject to ODI approval or filing procedures.
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