[Hot Spot] ODI outbound investment grew 10.3% in the first 10 months! Are cross-border businesses se

2022-12-09 10:12 Zhuo Rui

The Ministry of Commerce recently released data showing that from January to October this year, China's foreign non-financial direct investment of 627.4 billion yuan, an increase of 10.3% (equivalent to 94.36 billion U.S. dollars, an increase of 7.3%). Among them, the flow to the leasing and business services industry 32.08 billion U.S. dollars, an increase of 22.2%: flow to the manufacturing industry, wholesale and retail trade, construction and other areas of investment have shown growth. Non-financial direct investment in countries along the Belt and Road amounted to US$17.25 billion, an increase of 6.7% year-on-year, accounting for 18.3% of the total for the same period.

Talking about the reasons for the growth of China's ODI overseas investment, Professor Lv Yue of the National (Beijing) Open Door Research Institute of the University of International Business and Economics believes that, on the one hand, China is vigorously developing the modern service industry, and encourages Chinese enterprises with comparative advantages to invest overseas through investment, mergers and acquisitions, participation in shares, etc.; on the other hand, the pace of the transformation and upgrading of the traditional industries of various countries continues to accelerate, which has led to an increasing demand for various types of specialized leasing and business services such as On the other hand, the pace of transformation and upgrading of traditional industries in various countries continues to accelerate, and there is a growing demand for various types of specialized leasing and business services such as enterprise management services, consulting and investigation services.

It is noteworthy that, while the overall scale maintains growth, the trend of optimizing the structure of China's ODI overseas investment is becoming more and more obvious.

Advantages of ODI

1、To complete the exit of domestic funds in a legal way or to realize the purpose of obtaining foreign currencies abroad without the exit of domestic funds;

2、Exploit overseas market, obtain local policy or tax preferences, and accelerate the speed of capital accumulation;

3、Facilitate business transfers with overseas customers and reduce transfer procedures and costs;

4、Improve the image of domestic enterprises and increase the added value of enterprises;

5、Fully absorbing foreign advanced technology and management experience as well as grasping external information in a timely manner

6、Effectively utilize two resources and two markets to circumvent foreign trade barriers;

7、Integrate the development of domestic and foreign enterprises and optimize the allocation of resources;

8、Following the return of overseas funds to invest in their home countries can enjoy the corresponding capital subsidies given by the financial departments at the provincial and municipal levels.

Application Process

ODI filing involves three departments: the Ministry of Commerce, the NDRC and the OFAC.

First of all, the shareholders of the domestic enterprises need to apply for ODI filing with the provincial commerce departments and provincial development and reform commissions. The Ministry of Commerce (MOFCOM) is responsible for the overall approval of ODI matters and the issuance of ODI certificates to enterprises that meet the requirements.

Second, the NDRC is responsible for supervising the flow of enterprises' outbound investment in the industry and issuing the Notice of Filing of Outbound Investment Projects for enterprises that meet the requirements.

The OFAC is responsible for supervising the procedures related to foreign exchange registration and the exit of funds. After the filing procedures are completed, it is necessary to complete the foreign exchange registration procedures at the bank in accordance with the Foreign Exchange Management Regulations for Overseas Direct Investment by Domestic Institutions.

The whole process will take nearly 2-3 months, and after successful processing, you will get two certificates issued by the Ministry of Commerce and the Development and Reform Commission respectively --- "Certificate of Enterprise Overseas Investment" and "Notification of Filing of Overseas Investment Projects".

It should be noted that if the project involves sensitive industries, regardless of the amount of investment, it will be submitted to the Ministry of Commerce and the Development and Reform Commission for approval.

In recent years, China's rapid development of the economic system, the domestic enterprises continue to grow and develop, because China has strict control over foreign investment in capital, so you need to be guided by the policy, compliance for the relevant procedures, the funds can be legal and smooth exit, then one of the most common way is to do ODI filing. Below we answer a few common questions about ODI business.

ODI Business FAQs

Does a cross-border e-commerce business have to do ODI filing?

A: Not necessarily, if it is just a small business that opens a store on some e-commerce platform and sells some products, it is not necessary. However, if it is through the establishment of offshore companies in Hong Kong or abroad, and then the offshore company as the main body of the e-commerce platform, and finally if you want to make all the income obtained by the offshore company to return to the public account of the domestic enterprise through the bank in a compliant manner, then you have to do the ODI filing. At present, this compliant way of capital entry and exit has been adopted by many cross-border e-commerce companies.

Domestic enterprise A intends to set up an offshore enterprise a, without investing its assets and interests for the time being (no paid-in registered capital and no other offshore investment activities), when should A carry out the approval and filing procedures?

A: The enterprise should obtain the project approval document or filing notice before the project is implemented. Specifically, if a domestic enterprise A intends to establish an offshore enterprise a, A shall obtain the project approval document or filing notice before investing assets, interests or providing financing or guarantee for a.

Domestic enterprise A set up a wholly-owned subsidiary a in Hong Kong, a set up a wholly-owned subsidiary b in Hong Kong, now A intends to acquire b, so that it directly become its own subsidiary, A acquisition of b is required to fulfill the approval of foreign investment, the record procedures?

A: If a domestic enterprise A wholly owns an overseas enterprise a, and a wholly owns an overseas enterprise b, in this case, the acquisition of b by A does not result in the acquisition of additional overseas assets or interests, and there is no need for approval or filing of overseas investment.

Domestic enterprise A provides financial support to its overseas subsidiary a for the purpose of a's daily business activities. Is this type of situation an offshore investment and is an ODI filing required?

A: Domestic enterprises to overseas subsidiaries to increase capital (parent company to increase the registered capital of subsidiaries, etc., do not need to be repaid by subsidiaries), is an offshore investment, you need to do offshore company funds to change the record. If the domestic enterprises through overseas lending money to overseas subsidiaries (parent company lending money to subsidiaries, in accordance with foreign exchange regulations to fulfill the relevant procedures, the need for subsidiaries to be repaid within a certain period of time), is not an offshore investment, do not need to do the relevant record.

To what level should the domestic investment entity controlling the offshore enterprise be penetrated?

A: The investment subject, in accordance with the actual situation, should be traced back to the ultimate beneficial owner of the investment subject shareholding structure diagram, disclosure of the basic information of the ultimate beneficial owner.