Less Than Half A Month's Suspension Of Individual Overseas Direct Investment In Wenzhou

Relevant officials of the Wenzhou Municipal Central Bureau of the State Administration of foreign exchange said that

In January 7, 2011, the Wenzhou foreign economic and Trade Bureau announced the pilot scheme of Wenzhou's individual overseas direct investment in a high-profile manner on its official website, which marked Wenzhou as the first city in China to allow individuals to invest abroad.

The move of Wenzhou immediately attracted the attention of the whole world. The media at home and abroad reported this matter. It is believed that the pilot will find a new legal investment channel for hundreds of billions of private capital in Wenzhou, which is also in line with the great strategy of Chinese enterprises going abroad.

Many local economists in Wenzhou also express their high profile on various occasions. This pilot means a new space for pformation and upgrading of Wenzhou enterprises.

Just as the outside world is full of expectations, recently, people familiar with the matter told this reporter that the pilot of Wenzhou's personal overseas direct investment has been postponed.

Looking back on this pilot, it took less than half a month since January 7th.

People familiar with the matter told the Orient weekly that after the pilot test in Wenzhou at home and abroad, the State Administration of foreign exchange called the foreign exchange administration in Zhejiang and Wenzhou, saying that the plan was not approved by the State Administration of foreign exchange, and demanded that Wenzhou should not propagandize and keep a low profile.

The person familiar with the matter also revealed that for the sake of insurance, Zhejiang has cooled the matter and the pilot work of personal foreign direct investment has been halted.

"Up to now, there is no individual to apply for overseas investment projects.

If there is an application, relevant units will also advise individuals to postpone the formalities, and all have to wait for the above meaning.

If the funds go abroad, there will be projects first and then foreign exchange investment. If the foreign exchange administration closes the gates, the pilot will undoubtedly be frozen.

The Wenzhou Municipal Foreign Trade and Economic Cooperation Bureau is the announcers of this pilot scheme, and is also the examination and approval agency for individual overseas direct investment projects. Zhou Xiaoping, director of the Wenzhou foreign trade and Economic Cooperation Bureau Director, acknowledged to this reporter that the Wenzhou was a pilot project and was indeed not approved by the State Administration of foreign exchange.

However, the pilot project in Wenzhou is not without legal basis.

As a pilot project enforter, Zhou Xiaoping said that the basis of the pilot project in Wenzhou was the seventeenth article of the People's Republic of China foreign exchange management regulation, which was implemented in August 5, 2008: "domestic institutions, individuals who invest abroad or engage in the issuance and trading of overseas securities and derivatives shall be registered in accordance with the provisions of the foreign exchange control department under the State Council.

If the state regulations need to be approved or filed in advance by the competent authorities, approval or filing procedures should be carried out before the registration of foreign exchange. "

"The regulations on foreign exchange control only refer to the registration of the relevant administrative departments, and after approval or filing by the competent authorities, but there is no provision of which level of competent departments. The pilot in Wenzhou is a side ball."

Zhou Xiaoping said.

According to the person familiar with the matter, the pilot project in Wenzhou means that the right of foreign exchange management has been put down to the prefecture level city, which has raised the objection of the relevant departments of the State Administration of foreign exchange. At present, the competent departments in charge of Zhejiang province are communicating with the State Administration of foreign exchange and postponed the trial until the superior's support is received.

In fact, Wenzhou has long left a trail for this pilot project.

Zhou Xiaoping said that the scheme is a pilot project, and if it fails, it can be cancelled, and it will not have much impact.

Nevertheless, in an interview with this reporter, Zhou Xiaoping has repeatedly expounded the significance of the pilot. He believes that the pilot "Wenzhou going global" strategy has moved forward. The internal and external interaction of Wenzhou's capital has been realized, the main body of foreign investment has become more diversified, and personal foreign direct investment has also been more convenient and standardized.

Zhou Xiaoping said: "at least through the pilot, we know how much money flows out of the country every year, and we can know which areas and industries the funds go to."

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Compared with today's low-key official handling, when the pilot scheme just came out, it caused a great applause.

According to the pilot scheme introduced in January 7th, individuals participating in overseas direct investment must have four conditions at the same time: holding a People's Republic of China resident identity card and obtaining a private passport; having full civil capacity for the age of 18 and above; having Wenzhou residence registration.

The pilot also specified the amount of individual overseas direct investment, and stipulated that the total annual amount should not exceed 200 million US dollars.

During the pilot period, the amount of single overseas investment does not exceed $3 million.

If a number of investors jointly implement an offshore direct investment, the total investment will not exceed $10 million.

In addition, the pilot scheme also limited the investment mode of individual overseas direct investment.

According to the pilot scheme, individual overseas direct investment can be established through overseas acquisitions, shares and other ways to establish non-financial enterprises overseas or obtain the ownership, control and management rights of the non-financial enterprises.

Zhou Dewen, President of the Wenzhou Association of small and medium enterprises, told orient weekly that the introduction of the pilot scheme aroused concern from all circles. The foreign trade speculated that whether the private capital with a total amount of at least 800 billion yuan would take the opportunity to go abroad and set off an overseas wave of investment.

Zhou Dewen said: "at the just concluded China Africa economic and trade forum, the ambassadors of more than 10 countries and counsellors from more than 50 countries talked about the pilot work in Wenzhou, and hoped that Wenzhou capital could invest in these countries. At present, we have received dozens of advisory telephone calls.

The introduction of the plan will certainly be beneficial for individuals to invest abroad. Now many people are concerned about the sustainability of the plan.

Zhou Dewen believes that the pilot scheme is strictly restricted. According to the plan, it only allows investment in industry, which is very unfavorable to Wenzhou's foreign investment. Traditionally, Wenzhou people invest mainly in commerce and trade.

According to statistics, the Wenzhou army's investment in the New York supermarket industry has exceeded $one hundred million. In the Manhattan small commodity wholesale market, more than 200 Wenzhou wholesalers import two hundred containers from mainland China at least 5 million yuan per container per week, and the annual volume of pactions is as high as 52 billion yuan.

In South America's Argentina, Wenzhou based Chinese supermarkets already own 30% of the market share of the food and beverage retail market.

As of 2009, about 600000 Wenzhou people started business in 93 countries and regions, and set up more than 500 overseas enterprises.

In view of the fact that no one has applied for personal direct investment abroad, Zhou Xiaoping, director of the external economic and Trade Bureau of Wenzhou, thinks that it is mainly investment opportunities for industrial projects. Besides, some individuals are still waiting.

In Zhou Dewen's view, if the pilot of personal investment is in line, then Wenzhou's capital may flow to Europe where Wenzhou overseas Chinese gather the most, followed by emerging markets such as Africa and Latin America.

As for the industry of investment, he believes that SMEs in Wenzhou will choose the traditional strong industries of Wenzhou, such as automobile and motorcycle industry, electronic accessories and new energy industries.

Li Jianping, director of Wenzhou private capital service center, believes that the biggest significance of this plan is to legalize Wenzhou's overseas investment. "In 2009, Wenzhou's investment in Shanxi coal mine failed to show that the policy risk is far greater than the investment risk."

Li Jianping said that if the pilot is successful, the private capital service center of Wenzhou will conduct overseas visits in various directions, create overseas investment products for Wenzhou's private capital, and help Wenzhou's capital go to sea smoothly.

According to our reporter, business circles are right.

Cai Hua, President of the Zhejiang Capital Investment Promotion Association, which has studied Wenzhou capital for a long time, said to "Orient orient weekly" that private capital in Wenzhou has been expanding rapidly in the past ten years. Wenzhou capital has made great success in finding investment opportunities throughout the country. However, with the change of Shanxi coal in 2009, Wenzhou's capital has withdrawn from the energy sector, and the number of overseas investors has increased rapidly.

"Capital is natural, and Wenzhou's capital is international."

Cai said that Wenzhou's capital flow through underground banks to overseas has been very smooth.

Cai Hua believes that in recent years, Wenzhou's capital has favored the overseas mineral resources, and many people have invested in oil and mineral development in Africa. However, the pilot scheme stipulates that no direct investment of individuals is allowed to invest in the establishment of special purpose companies outside China, technologies and goods that are prohibited from exporting China, and overseas investments in energy and mineral resources, foreign investment in countries not established with China, overseas investments in specific countries or regions, and overseas investments involving multi national (regional) interests.

"It is difficult for the government to accept the active Wenzhou capital so strictly that the investment field is strictly regulated."

Cai Hua told this reporter.

According to Zhou Xiaoping, before the introduction of the pilot, Wenzhou capital has to invest overseas and can only invest in a registered company.

"If you want to invest overseas, you will first register a company in Wenzhou. This company is a shell. Through this company, capital can be launched overseas, for a long time, the procedures are complex, and many business opportunities abroad are fleeting. Therefore, many Wenzhou businessmen prefer to go underground to pfer their capital overseas."

Many Wenzhou businessmen who have invested overseas have expressed no interest in this plan and will not apply for it. The reason is basically what Zhou Xiaoping said.

A businessman surnamed Chen traveled extensively between Wenzhou and Canada and had many properties overseas. He said that the quickest way to get capital is to go underground.

This reporter learned that these banks are usually open overseas or in Hongkong, and rely on investment companies and Guarantee Corporation to contact businesses in the mainland. These companies have long been networked.

Compared to the normal bank remittance, underground banking procedures are simple and fast, and capital turnover is faster.

Mr. Chen said there was some difference between the exchange rate of the underground banks and the normal exchange rate, which is the profit of the underground banks. "The price difference is about 3/1000, plus the remittance fee."

He said that such underground money collection channels in Wenzhou has been quite common, and the capital outflow of Wenzhou corresponds to the influx of hot money abroad.

"The black market exchange rate will change at any time with the exchange rate, and it will be cheaper in the morning than in the afternoon."

Mr. Chen told this reporter.

Relevant officials of the Wenzhou Municipal Central Bureau of the State Administration of foreign exchange said that Wenzhou's capital flows overseas through underground channels. It is an indisputable fact that the pilot is trying to legitimize individual overseas direct investment, from underground to sunshine, and also to block the influx of overseas hot money.