China's Ministry of Commerce this week called for public comments on a proposed relaxation of controls on strategic investments by foreign investors in mainland-listed companies.
The proposed changes would slash the minimum holding period for a foreign investor taking a strategic stake in a local company to one year from three years under the existing Administrative Measures for Foreign Investors' Strategic Investment in Listed Companies, which went into effect in 2006.
Similarly, the amount of overseas assets a foreign investor making a strategic investment would have to own would be cut to $50 million from $100 million, while the minimum amount of overseas assets the investor must manage would fall to $300 million from $500 million.
A Hong Kong-based lawyer, who declined to be named, said under existing regulations, the acquisition of more than 10% of a mainland company's shares would count as a strategic investment, triggering the three-year minimum holding period.
However, that 10% line in the sand is subject to case-by-case approval by the Ministry of Commerce and has effectively been a requirement in name only for a while, the lawyer said. Under the proposed changes, that line would be "erased entirely," he said.
Those reforms would be "positive for foreign investors in China," providing much greater flexibility while allowing Chinese companies to attract "more and a broader array of partners," said Thomas Cheong, Principal Financial Group's Hong Kong-based president of North Asia.
The public comment period extends through Aug. 29.