Foreign investment in A-share companies: A further consultation draft on strategic investments by foreign investors in A-share listed companies was published in 2018, with the final rules expected to be passed in 2019. Key proposed changes include reducing the lock-up period from three years to one and abolishing the minimum 10% of share capital for such investments.
Auto sector: The timetable has been set for the removal of foreign investment limits in the auto sector, beginning with new energy vehicles and special-purpose vehicles in 2018, then extending to commercial vehicles in 2020 and passenger vehicles (including the ability to have more than two presences) in 2022. New requirements for investments in the auto sector, to be released imminently, are expected to restrict new production capacity in complete combustible fuel vehicle projects and introduce additional criteria (including a minimum 100,000 passenger vehicles or 5,000 commercial vehicles) for complete electric vehicle projects.
Share buy-backs: In November, following the reform to the PRC Company Law, the Shanghai and Shenzhen stock exchanges issued consultation draft implementation rules for share buy-backs. The drafts further clarify that repurchases/buy-backs are “necessarily intended for preserving the value of listed companies and shareholders’ interests”. The drafts contain detailed requirements on buy-back plans and disclosure procedures, as well as measures to prevent abuse of share buy-backs. We expect the drafts to be finalised and enacted in 2019.
Foreign investment law: 2019 may see the enactment or the publication of a further consultation draft of the Draft Foreign Investment Law since the first draft was published in 2015. The new law is expected to bring “variable interest entity” structures within the scope of foreign investment regulation and harmonise the corporate governance requirements for Sino-foreign joint ventures and domestic companies.
Foreign investment reform: In 2019, the government is expected to continue opening up the market to foreign investors and improving the foreign investment environment. A new negative list applying to foreign and domestic investors in all sectors is expected to be published in early 2019, which will entrench the principle of “investment is permitted where not prohibited”. Further, the government expects to remove, by March 2019, all restrictions on market entry by foreign investors (other than those set out in the “negative list” of restrictions on foreign investment), as well as all licensing requirements that do not appear in an approvals catalogue which will be published imminently. The services sectors, including finance, education and health, are likely to form the focus of foreign investment reform in 2019.