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China issues code of conduct for firms investing abroad
SHANGHAI, Dec 19, 2017 (BSS/AFP) – China has released a code of conduct for
private companies investing abroad as it seeks to head off risky
acquisitions, with state media reporting on Tuesday that a blacklist of
violators was in the works.
The move by the country’s top economic-planning agency appears to be the
latest in a government campaign to prevent acquisitive Chinese firms from
over-extending themselves with ill-advised deals abroad that could threaten
financial stability at home.
The guidelines, released on Monday by the National Development and Reform
Commission (NDRC), contain few hard and fast rules, but rather a collection
of big-picture advice on operating overseas.
This includes staying within a company’s financial constraints and core
competencies, avoiding high-leverage financing, respecting local laws and
customs, and adhering to socially and environmentally responsible operations.
The state-run China Daily reported Tuesday that a similar code for state-
owned entrprises is also in the works, as well as a blacklist of violators.
It cited an unnamed NDRC official, who said the guidelines and blacklist
“will become major policy tools in curbing investment risks”, according to
the newspaper.
The code will complement guidelines issued in August, which laid out rules
restricting investment in industries such as property, sports and
entertainment, the official was quoted saying.
China has moved aggressively over the past year to halt a flood of overseas
investment that has raised concerns of capital flight, and contain in
ballooning debt at home that has drawn warnings of a potential global
financial crisis.
In particular, authorities are said to be targetting large private Chinese
companies such as Wanda, Fosun, HNA and Anbang, which have drawn increased
scrutiny over concerns they were racking up dangerous debt levels with tens
of billions of dollars in sometimes flashy foreign investments.
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In conjunction with the private-firm guidelines, the NDRC also released a
statement by an unnamed official with the planning agency saying some Chinese
companies had encountered “irregularities in overseas investments”.
“Some companies did not follow domestic and foreign audit procedures and
conducted illegal investments overseas,” the statement said.
“Some companies made blind decisions and caused huge economic losses. Some
companies were involved in malignant competition and undertook overseas
projects regardless of the cost.”
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