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Chinese State-Owned Enterprises Investing Abroad: Home Country Issues

Paul D. McKenzie, Proceedings of 54th Annual Rocky Mountain Mineral Law Institute (2008)

The rapid economic growth of the People's Republic of China (PRC) and the accompanying policy reforms have created many new commercial opportunities, including the opportunity for Chinese corporations to expand overseas and the opportunity for foreign companies to seek investment from or sell product to Chinese corporations. Among the sectors to feel the effects of the growth of the Chinese economy most acutely is the resource sector. Not only does China have a voracious appetite for a wide variety of metals and other resources, but the Chinese government has also actively encouraged Chinese companies to secure supply, among other things, through acquisitions of or investments in foreign producers.
These opportunities for overseas resource companies come with certain challenges. Chinese companies tend to adhere to business practices that are not altogether consistent with business practices of other global companies. Chinese resource companies are characterized by a high degree of state ownership, and state-owned enterprises (SOEs) are accountable to the government in respect of their investment and other business activities. Overseas investment by a Chinese company is subject to compliance with a variety of regulations.
This chapter provides an overview of the Chinese regulations applicable to overseas investment by SOEs, with a focus on what non-Chinese targets of suc