Member Article

The Guangdong Provincial Development and Reform Commission (“GDRC”) promulgated the Provisional Measures for the Administration of the Verification of Foreign Investment Projects on 18 February 2006. The Provisional Measures are the local implementing rules for the Provisional Measures for the Administration of the Verification of Foreign Investment Projects promulgated by the State Development and Reform Commission (“SDRC”) on 9 October 2004 (“SDRC Measures”). The SDRC Measures specify detailed verification procedures for all foreign investment projects and the role of the various levels of development and reform commission in the verification process. The Provisional Measures confirm that completing the verification procedures is a condition for attending to all other procedures relating to the approval and implementation of a foreign investment project in China. Approval levels The PRC has published a Catalogue for Guiding Foreign Investment in Industries (“Catalogue”) which classifies foreign investment projects into three categories: encouraged, restricted and prohibited. Foreign investment projects not listed in the Catalogue are classified as permitted projects. The Provisional Measures are applicable to the following projects in Guangzhou Province other than in Shenzhen: • projects which are classified as restricted; • projects with a total investment of more than US$100 million that are classified as encouraged or permitted; • certain infrastructure and excavation industry projects with a total investment between US$300 million and US$100 million that are classified as encouraged or permitted. The nature of the projects governed by the Provisional Measures include foreign equity and cooperative joint ventures, wholly foreign-owned enterprises, acquisition of domestic enterprises by foreign investors, capital increase in existing foreign investment enterprises, etc. Verification procedure Project applications for encouraged and permitted projects with total investment of over US$100 million and restricted projects with total investment of over US$50 million shall be reviewed first by the GDRC and then forwarded for verification by the SDRC. Encouraged and permitted projects with total investment of over US$500 million and restricted projects with total investment of over US$100 million must be verified by the State Council after the project application has been verified by the SDRC. Project applications for restricted projects with total investment of less than US$50 million shall be verified by the GDRC. Infrastructure and excavation industry projects with a total investment between US$300 million and US$100 million shall be verified by the GDRC. Project application The Provisional Measures specify the contents of the project application and the various documents that need to be attached to it. The documents include the opinion on the environmental impact report of the environmental bureau in charge and an opinion on the site selection by the planning bureau. The Provisional Measures clarify that the ultimate verification level of a project determines the level of environmental bureau and planning bureau that is required to issue the relevant opinion in support of the project application. For instance, for a project that is to be approved by the SDRC, the environmental opinion shall be issued by the provincial or national level environmental protection administration. Application procedure Projects that require verification by the GDRC or the SDRC shall be first submitted to a municipal development and reform commission of at least prefectural level. The opinion of this local commission shall also be submitted to the GDRC or SDRC. The Provisional Measures require a verification authority to issue a verification report or forward the application with its opinion to a higher level authority within 20 days of receipt of the application.