China implements tighter rules on 'irrational' overseas investments

'Irrational' investments in real estate discouraged

China's new rules on overseas investments, which came into effect on Thursday, have further tightened control over irrational investments in real estate and entertainment, though analysts say lawful investments will continue to be encouraged.

Experts said the new rules will reduce the growth rate of China's overseas direct investments (ODI) and further boost investment projects that have a positive effect on domestic industries.

Some companies contacted by the Global Times reacted calmly to the new rules.

Electric car leader BYD told the Global Times in a statement on Thursday that the new rules have no impact on the company's business and that it will not revise its strategy. BYD has invested in overseas plants, including in the US.

A document the State Council released in August 2017 said overseas investments in real estate, hotels, cinema, and entertainment would be limited, while investments in sectors such as gambling would be banned.

Xi Junyang, a finance professor at the Shanghai University of Finance and Economics, told the Global Times on Thursday that because the expertise of some potential investors are limited to sectors outlined by regulators, they will have to give up their overseas investment plans, and this will slow down China's ODI growth rate.

"On the other hand, as the Chinese economy continues to grow, total ODI may continue to rise," Xi said.

Zhang Ning, a research fellow at the Chinese Academy of Social Sciences, told the Global Times on Thursday that the Chinese government's attitude toward ODIs shifted from encouragement before 2016 to a stern policy in 2017, when authorities considered many overseas investments irrational.

Authorities have recently tightened controls on aggressive overseas acquisitions by companies including Dalian Wanda, HNA Group and Anbang Insurance Group.

"The new rules will increase scrutiny on some overseas investment projects, making them more difficult to accomplish, but it is worth noting that the new rules are by no means prohibiting investments that fall under the sensitive category," Zhang noted.

"Investments backed by lawful funding will continue to be approved," Zhang said.

Domestic automaker Zhejiang Geely Holding Group gained global media attention for acquiring a nearly 10 percent stake in German automaker Daimler AG for about $9 billion.

A Geely executive said on Tuesday that the company used overseas funding, and denied that it used local State-owned capital as suggested by some Chinese media.