Introduction
On November 1, 2024, six government departments, including the Ministry of Commerce and the China Securities Regulatory Commission, jointly issued the “Measures for the Administration of Strategic Investments by Foreign Investors in Listed Companies” (hereinafter referred to as the “New Measures”), which will be effective from December 2, 2024. The New Measures aim to broaden foreign investment channels into China’s securities market, encourage long-term value investments, optimize corporate governance structures, and protect the rights and interests of listed companies and their shareholders.
This article provides a law firm perspective on the background, key changes, and compliance recommendations regarding the New Measures, with a focus on the impact on industries in Northern China.
I. Background and Purpose of the New Measures
The New Measures are a comprehensive revision of the “Measures for the Administration of Strategic Investments by Foreign Investors in Listed Companies,” which was first issued in 2005. Over the past 19 years, the previous version provided the legal framework for foreign investors entering China’s securities market. However, with the evolving landscape of the securities market, the new measures not only strengthen institutional safeguards for foreign investment but also ensure greater alignment with the development priorities of the modern era.
II. Key Changes and Highlights of the New Measures
1. Expansion of Foreign Investor Scope
The definition of foreign investors has been broadened to include foreign natural persons, enterprises, and other organizations. This expansion enhances the flexibility and operability of foreign investments.
2. Lowering Investment Thresholds
o The required total assets for foreign investors have been reduced to USD 50 million, with a minimum of USD 300 million in assets under management.
o The requirement for foreign investors to hold at least 10% of shares in their initial strategic investment has been removed.
3. Introduction of Tender Offer Mechanism
The new measures clarify that a tender offer is now an acceptable form of strategic investment, increasing transaction flexibility.
4. Cross-border Share Swap Mechanism
Foreign investors can now invest by holding shares in foreign companies or paying through newly issued shares, reducing cash requirements and transaction costs.
5. Shortened Lock-up Period
The lock-up period has been reduced from three years to 12 months, increasing liquidity and investment flexibility.
III. Impact of the New Measures on Industries in Northern China
The New Measures will have a particularly significant impact on industries in Northern China, especially in the Beijing-Tianjin-Hebei region and the Bohai Sea area, which are important clusters for high-end manufacturing and new energy industries. The introduction of foreign investment will help address technological innovation gaps and bring advanced management experience, boosting international competitiveness. The specific impacts include:
• High-end Manufacturing, New Energy, and Information Technology Industries
Foreign investment will bring advanced technology and management expertise, boosting productivity and international competitiveness. In particular, foreign participation in the fields of new energy vehicles and intelligent connected cars is expected to accelerate technological innovation and industrial upgrades.
• Agriculture and Food Processing Industries
Northern China is a key grain-producing region, but there is significant potential to enhance the value-added processing of agricultural products. Foreign collaboration will help upgrade processing technologies and add value, particularly in food processing and high-value product production.
• Financial, Medical, and Educational Services
As demand for financial, medical, and educational services rapidly grows in Northern China, foreign capital will introduce innovative business models and support the development of biotechnology, cybersecurity, and fintech sectors. Foreign investment will help these industries undergo digital transformation, improve service quality, and foster industrial upgrading.
Conclusion
The implementation of the New Measures marks a new phase of foreign investment opening in China’s securities market, offering foreign investors more expansive investment opportunities. When entering the Chinese market, foreign investors are required to engage professional service institutions to assist with compliant investments, ensuring their long-term and stable development in Chinese market.