Premier Keqiang Li executed State Council Decree No. 673 on November 30, 2016 to promulgate the Regulations on the Approval and Recordation of Enterprise Investment Projects (the “Regulations”), which will go into force on February 1, 2017. The Regulations are the first administrative regulations in China on fixed asset investment and has major implications in transforming the government’s investment administration duties and functions as well as consolidating its dominant position in enterprise investment. The Regulations also further provide for the approval and recordation by the government of investment projects. The key points are highlighted below:
1. Project approval actions are regulated. The enterprise investment projects under the Regulations (the “Projects”) refer to an enterprise’s fixed asset investment projects within the territories of China. The Regulations stipulate that administrative approval is required over enterprise investment projects which involve national security, major national productivity strategy, the development of strategic resources and major public interest, while the rest may be done through recordation. When applying for project approval, an enterprise is required to submit a project application and the prerequisite supporting documents per the relevant laws and administrative regulations. An approval agency will in its review determine whether such project will jeopardize national security, is compliant with the relevant development plans, the technical standards and production policies in place, whether it would reasonably develop and effectively utilize resources, as well as whether there would be any serious impact to the public interest. The review period will not in principle exceed 20 working days and an approval for an extension will not exceed 40 working days.
2. Project recordation actions are regulated. To prevent project recordation from becoming de facto administrative approval, the Regulations provide that for a project under recordation, the enterprise is required to provide the recordation agency various information, such as a basic profile of the enterprise, the project name, construction location, construction scale, construction details, total project investment amount and the statement that the project meets the relevant industry policies, and it will be held responsible for the accuracy of such information. The recordation is completed upon the agency’s receipt of all such required information. If a recordation agency finds that a recorded project is prohibited from investment or construction under the relevant industry policies or requires administrative approval, the enterprise shall be timely informed for correction or to follow the administrative approval procedures, and the relevant agencies shall also be informed of the matter.
3. Interim and ex post supervision are enhanced. Pursuant to the Regulations, approval and recordation agencies, as well as other relevant agencies, are all required to strengthen their interim and ex post supervision and fulfill their supervisory responsibilities under the principle that the agency granting the approval should be responsible for such supervision. The supervision and inspection of investment projects are to be strengthened through online supervision and onsite inspection. An enterprise is required to faithfully submit basic information such as the construction commencement, construction progress, and completion of the project; at the same time, the approval agencies, recordation agencies and other relevant departments with supervisory responsibilities should create a project information sharing mechanism. The approval or recordation of such enterprise’s project, as well as any legal violations found in its implementation of the project and how it has handled them shall be publicized through a national social credit sharing information.
4. Services are to be optimized. To enhance transparency and facilitate enterprises to engage in their businesses, the Regulations require that unless state secrets are involved, project approval or recordation should in principle be handled by a national online project supervisory platform. Approval and recordation agencies are required to disclose on such supervisory platform their project-related industry policies, approval procedure and timelines and provide related consultation services to enterprises.
5. Liabilities will be strictly pursued and enforced. The Regulations sets out clear legal liabilities for an enterprise which commences construction without going through project approval or engages in construction without following the approved construction location, construction scale or construction detail, fails to file the project for recordation or provides false information to the recordation agency, or invests in an investment project that is prohibited under the industry policies for investment projects. The Regulations also stipulate the legal liabilities of approval and recordation agencies as well as their staff for conduct such as dereliction of duty, abuse of authority and corruption.