— OVERSEAS Investment & Market Analysis
Overseas Direct Investment Filing and Malaysian Market Analysis
When a Chinese company sets up, increases investment in or acquires a business in Malaysia, the first rules it has to deal with are not Malaysia’s but China’s own. Overseas direct investment (ODI) filing is the Chinese government’s compliance control over companies going overseas. It is a procedure that must be completed before a project is implemented, not an optional step.
Yingke Malaysia’s service has two parts. The first helps the Chinese investor work out the filing route and align the filing timeline with the company incorporation and funding arrangements on the Malaysian side. The second provides feasibility studies, policy review and industry market research focused on Malaysian policy and the target industry.
— ODI Compliance
1. ODI Filing: China’s Compliance Control over Going Overseas
The National Development and Reform Commission’s Administrative Measures on Overseas Investment by Enterprises, in force since 1 March 2018, set out the approval and filing system for domestic enterprises investing overseas. They require the investor to complete project approval or filing, report relevant information and cooperate with supervision and inspection.
Covered investment activities include setting up an overseas enterprise or adding investment to an existing one, acquiring ownership and management rights in overseas enterprises or assets, building or expanding overseas fixed assets, setting up or taking a stake in overseas equity investment funds, and providing financing or guarantees;
Investors have the right to make their own overseas investment decisions and bear their own risks, but they must still complete approval or filing as required;
Where an investor invests overseas through a company it controls in Hong Kong, Macao or Taiwan, the Measures apply by reference; the same applies where a domestic individual invests overseas through an overseas company the individual controls.
— Approval or Filing
2. Approval or Filing: Which One Applies
The type of management depends on whether the project is sensitive. Sensitive projects require approval, and non-sensitive projects require filing, with a different authority responsible in each case:
TYPE
APPLICABLE PROJECTS
AUTHORITY
Approval
Sensitive projects: those involving sensitive countries or regions, or sensitive industries
NDRC
Filing
Non-sensitive projects where the investor is a centrally administered enterprise
NDRC
Filing
Non-sensitive projects where the investor is a local enterprise and the Chinese investment amount is US$300 million or above
NDRC
Filing
Non-sensitive projects where the investor is a local enterprise and the Chinese investment amount is below US$300 million
Provincial-level development and reform authority where the investor is registered
Sensitive countries and regions include those without diplomatic relations with China, those in war or civil unrest, and those where investment is restricted under international treaties or agreements. Sensitive industries include the research, development, manufacture and maintenance of weapons and equipment, the development and use of cross-border water resources, news media, and other industries where overseas investment by enterprises needs to be restricted;
Malaysia has diplomatic relations with China, so a typical project is usually non-sensitive, but whether a specific project involves a sensitive industry still has to be assessed case by case;
“Chinese investment amount” means the total of currency, securities, physical assets, technology, intellectual property, equity, debt and other assets and rights that the investor, directly and through overseas enterprises it controls, puts into the project, together with any financing or guarantees provided.
— Key Obligations
3. Key Timing Points and Ongoing Obligations
Timing
The approval document or filing notice must be obtained before the project is implemented, that is, before the investor or the overseas enterprise it controls puts in assets or rights or provides financing or guarantees
Validity
An approval document or filing notice is valid for 2 years; any extension must be applied for at least 30 working days before expiry
Changes
An application to amend must be made before the event occurs, for example where investors are added or removed, the investment location or the main content and scale change significantly, or the Chinese investment amount changes by 20% or more of the original amount, or by US$100 million or more
Reporting
Large non-sensitive projects (Chinese investment amount of US$300 million or above) must be reported before implementation; material adverse events must be reported within 5 working days; a completion report is due within 20 working days after the project is completed
Supervision
Regulators may inspect through online monitoring, enquiry letters and spot checks; the investor is responsible for the authenticity, legality and completeness of the materials it submits
— Consequences
4. Consequences of Non-Compliance
The Measures also provide that, for a project without a valid approval document or filing notice, foreign exchange, customs and other authorities will not handle the related procedures, and financial institutions will not handle related fund settlement and financing business. In addition, non-compliance may lead to the following consequences:
Where a project is implemented without an approval document or filing notice, the authority will order the investor to suspend or stop the project and correct the situation within a time limit, and will issue a warning to the investor and the persons responsible; where a crime is constituted, criminal liability will be pursued;
Where an application is made by deliberately splitting a project, concealing facts or submitting false materials, it will not be accepted or filed; where an approval or filing was obtained by fraud or bribery, it will be revoked;
Violations will be recorded and publicised through the national credit information sharing platform and similar systems, and the relevant departments will jointly impose disciplinary measures.
— Our ODI Support
5. How We Assist with the Filing Stage
01
Route assessment: based on the investor, industry, amount and investment structure, we help assess whether the project is likely to fall under approval or filing, and which steps are involved;
02
Document preparation: we help organise the documents and information related to the Malaysian company, such as incorporation documents, shareholding structure, business plan and investment proposal;
03
Timeline alignment: because the filing must be obtained before funds are put in, we line up the incorporation of the Malaysian company, bank account opening and capital injection on the same timeline as the filing progress in China;
04
Ongoing reminders: we help you keep track of ongoing requirements after filing, such as validity, changes and reporting, and understand the Malaysian company’s later operational and compliance matters.
Note: The filing in China is submitted by the investor itself to the Chinese authorities, and the parts involving Chinese law usually need the participation of lawyers or professional advisers in China. Besides approval or filing with the development and reform authorities, overseas investment usually also involves commerce and foreign exchange procedures, which are handled in accordance with the relevant rules. Yingke Malaysia mainly handles the information, planning and implementation arrangements on the Malaysian side, and can help coordinate with advisers in China.
— Market Analysis
6. Malaysian Market Analysis
Filing addresses “going overseas in compliance”, while market analysis addresses “whether it is worth going, and how”. Both the project filing form and the application report require basic details such as the investment destination, the main content and scale of the project, and the Chinese investment amount, and the conclusions of market research can support these details. We provide research support in three areas:
01
Feasibility Study
For a specific investment project, we prepare a feasibility analysis covering market demand, investment scale, operating costs, implementation path and key risks.
02
Policy Review
We review the policies relevant to your project, including foreign equity rules, industry regulation, licensing requirements, taxation and investment incentives, and explain their practical impact.
03
Industry Research
We study the market size, competitive landscape, supply chain and customer structure of the target industry in Malaysia, and prepare an industry market research report.
Questions the Research Typically Answers
Whether the industry is open to foreign investment in Malaysia, and whether there are requirements on shareholding, business scope or licences;
Where the target customers are, and how the local market works together with other ASEAN markets;
Roughly what land, factory, labour and logistics costs look like, and which locations are more suitable;
Who the existing competitors and potential partners are, and which form of cooperation or investment to consider when entering.
Key point: Whether a filing is accepted and what additional materials are needed are decided by the Chinese authorities under the rules in force at the time. Market analysis and feasibility studies are based on public information, industry information and research findings, reflect judgements at the time of the research, and do not constitute investment advice or any guarantee of project returns.
— How We Help
How We Can Help
Yingke Malaysia works together with Yingke China, and starts by understanding your investment plan, the investor entity and your stage, and then explains what the filing and the market research each involve and in what order they should be arranged. If you are considering investing in Malaysia, we welcome you to get in touch and begin with a conversation about your project.
※This page is for general reference only and does not constitute legal, tax, investment or foreign exchange advice. It is based on the National Development and Reform Commission’s Administrative Measures on Overseas Investment by Enterprises (in force since 1 March 2018). China’s rules on overseas investment and foreign exchange management, the procedures involved, the amount thresholds and the authorities responsible may change as policy is adjusted; please refer to the latest rules of the relevant Chinese and Malaysian authorities. For matters involving Chinese law and regulation, please consult qualified professionals in China. Before making any investment decision, please verify the latest requirements with the authorities and consult an adviser.
