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Beijing Issues New Restrictions on Overseas Investments

◎ The overseas merger and acquisition sprees by Chinese corporations in recent years were partly conducted in response to the slowing Chinese economy.

The Communist Party’s State Council issued a regulatory notice on August 18 that includes new guidelines and restrictions on overseas investments.

Chinese domestic enterprises are now restricted from investing in several overseas sectors, including the entertainment industry, real estate, hotels, film studios and sports clubs. Enterprises are also prohibited from investing
in overseas gambling and sex industries. These new restrictions also require mandatory supervision for overseas Chinese investments in order to guard against various risks.

Context: Beijing has been tightly regulating and restricting Chinese businesses from investing overseas since the start of 2017. Previously,
large Chinese corporations like Wanda Group and Anbang Insurance Group engaged in huge overseas investment sprees, resulting in the massive capital outflow from China in recent years.

Why it matters: The overseas merger and acquisition sprees by Chinese corporations in recent years were partly conducted in response to the slowing Chinese economy. Beijing’s overseas investments restrictions may be an attempt to retain capital in China to prevent potential shocks to the Chinese economy before the 19th Party Congress.

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