China Draws Red Line for Investment of Central Enterprises

The State-Owned Assets Supervision and Administration Council (SASAC) of the State Council recently issued the Measures for the Supervision and Administration of Investment of Central Enterprises and the Measures for the Supervision and Administration of Overseas Investment of Central Enterprises. Both documents stress the need to give prominence to all-round and whole-process supervision in accordance with law and set stricter requirements for the overseas investment activities of central enterprises.

The two measures have the following four main points:

First, exercise supervision according to law. Attention should be paid to the clear delineation of the powers and duties of the SASAC and the central enterprises and effort should be made to accurately execute the duties of the capital contributors according to law. For investment supervision duties that should be carried out by the SASAC in accordance with laws, regulations and policies, stricter regulatory measures should be formulated in order to further strengthen supervision. For investment decisions that should be made by the central enterprises in accordance with law, enterprises should be allowed to make their own decisions and bear the responsibility in accordance with their development strategy and planning, and the SASAC should strengthen its supervision.

Second, exercise all-round supervision. Attention should be paid to the strengthening of the investment supervision system and effort should be made to achieve all-round supervision through the establishment of a sound investment management system, the optimisation of the investment execution information system, the implementation of the negative list for investment projects, and the strengthening of joint investment supervision.

Third, exercise whole-process supervision. Attention should be paid to putting equal emphasis on supervision before, during and after investment and effort should be made to achieve whole-process supervision by strengthening control beforehand, oversight during the investment process, and accountability after investment is made.

Fourth, explore innovative measures of supervision. Steps should be taken to implement the negative list system on a trial basis for investment projects, clarify the bottom line for the supervision of the investment of capital contributors, and draw the red line for the investment activities of central enterprises. The negative list of investment projects should be kept relatively stable and adjusted from time to time in a dynamic manner.

Under the negative list system, investment projects are divided into “prohibited” and “special supervision” categories. The “prohibited” category is off-limits to central enterprises, while projects under “special supervision” are subject to capital contributor verification by the SASAC. For projects not covered by the negative list, enterprises are free to make their own decision but must bear their own responsibility. The SASAC should strengthen supervision according to its powers and duties.

For details of these two documents in Chinese, please see:

http://www.sasac.gov.cn/n85881/n85921/c2525193/content.html and http://www.sasac.gov.cn/n85881/n85901/c2525230/content.html