Interpretation of “Decision of M88 game APK State Council on Cancelling and Delegating M88 game APK Power of Approval of a Batch of Items Requiring Administrative Approval and OM88 game APKr Issues”

On May 15, 2013, M88 game APK State Council promulgated “Decision of M88 game APK State Council on Cancelling and Delegating M88 game APK Power of Approval of a Batch of Items Requiring Administrative Approval and OM88 game APKr Issues” (Guo Fa [2013] No.19) (herein after referred to as M88 game APK “Decision”). According to M88 game APK Decision, M88 game APK State Council will remove 71 administrative approval items, delegate M88 game APK power of approval of 20 administrative approval items to authorities at M88 game APK lower administrative levels and remove certain items of administrative fees etc. (M88 game APK “Reform”).

I. Overview

M88 game APK Decision was promulgated as a result of M88 game APK Plan on Institutional Restructuring and Functional Transformation of M88 game APK State Council, with M88 game APK following characteristics:

i. Focus on M88 game APK Approval Authority of National Development and Reform Commission (“NDRC”)

M88 game APK approval authority of NDRC related to investment projects is M88 game APK focus of M88 game APK Reform. 14 administrative approval items relating to investment projects that require approval of NDRC are removed and M88 game APK power of approval of 12 items is delegated to authorities at M88 game APK lower administrative levels. M88 game APK administrative examination and approval items to be removed or delegated involve investment projects in certain crucial sectors such as civil airport construction.

M88 game APK power of approval of NDRC in relation to investment projects stems from Decision of M88 game APK State Council on Reform of Investment System promulgated in 2004. Pursuant to M88 game APK decision, investment projects within Catalogue of Investment Projects to be Approved by M88 game APK Governments should be approved by M88 game APK reform and development authority. OM88 game APKr investment projects should be filed with M88 game APK competent government authorities for records. Although certain investment projects will no longer require M88 game APK approval of M88 game APK investment authority of any level, M88 game APK Decision expressly stated that such investment projects are still required to be filed for records with M88 game APK government.

In addition, Decision also made it clear that for investment projects that no longer require M88 game APK approval of M88 game APK DRC at any level, government authorities responsible for supervision of land resources, environment protection and safe production should fulfill M88 game APKir duties and strengM88 game APKn M88 game APKir supervision of those projects. As investors should obtain approval for use of land, environmental protection as well as safe production etc., M88 game APK competent government authorities will play a more important role in supervision of M88 game APK investment activities of investors.

Approval authorities for foreign investment projects involving foreign capital have not been changed this time.

ii. Energy Projects

M88 game APK largest number of M88 game APK administrative approval items for which M88 game APK power of approval will be removed or delegated are related to energy projects, including hydropower station projects on non-major rivers, wind power projects and power grid projects etc. M88 game APK power of approval for most of related energy projects is delegated to M88 game APK provincial level or M88 game APK local investment authorities.

While such delegation is conducive to M88 game APK development of M88 game APK related sectors and can lower M88 game APK threshold for private enterprises, it can also give rise to reckless investment.

iii. Different Degrees of Delegation

Out of M88 game APK 20 items for which M88 game APK power of approval is delegated to authorities at M88 game APK lower administrative level, M88 game APK power of approval for 3 items is delegated to M88 game APK competent local investment authorities, while M88 game APK power of approval for M88 game APK oM88 game APKr 17 items is delegated to authorities at M88 game APK provincial levels. Such different degrees of delegation reflect M88 game APK different degrees of supervision that M88 game APK state accords to different investment projects. M88 game APK Decision does not specify M88 game APK exact local authority that M88 game APK power of approval is delegated to. It probably would be clarified later in form of amendment to relevant laws and regulations.

II. Impact of M88 game APK Decision on various Sectors

M88 game APK Decision has impacts on various sectors and industries. Below is an analysis of M88 game APK impacts on M88 game APK key sectors and industries.

i. Construction of Civil Airport

According to M88 game APK Decision, civil airport construction projects will no longer need M88 game APK approval of M88 game APK NDRC; only filing for records will be required.

Economic growth and M88 game APK prospering tourism industry necessitate a higher demand on air transportation. In particular, M88 game APK rapid development of general aviation requires M88 game APK transformation of infrastructure on which M88 game APK traditional medium and large aviation transportation sectors are based. However, airport construction and expansion are subject to strict regulation and tedious approval procedures which impede M88 game APK development of civil airports and civil transportation. M88 game APK Decision is without doubt favorable to investment on airport expansion. M88 game APK simplified approval procedure can lower M88 game APK cost and expedite airport expansion. In M88 game APK case of general aviation, M88 game APK expansion of M88 game APK traditional airports can bring along M88 game APK formation of M88 game APK local aviation industry center. Coupled with M88 game APK Opinion on Deepening M88 game APK Reform of China's Low-altitude Airspace issued in 2010, M88 game APK Decision is providing a great opportunity for developing general aviation to those cities and regions that have already reformed M88 game APK regulation on low-altitude airspace like Chongqing and Tianjin.

However, it should be noted that, even M88 game APK approval of NDRC is no longer necessary, oM88 game APKr governmental authorities would still need to cooperate and coordinate with each oM88 game APKr in order to facilitate airport expansion.

ii. Urban Rail Transit Projects

Two of M88 game APK items mentioned in M88 game APK Decision are related to urban transit projects. Investment projects on urban rail transit vehicles and M88 game APK building of signal systems and power traction control systems are no longer subject to M88 game APK NDRC approval. In addition, NDRC is delegating M88 game APK power of approval of urban express rail projects to M88 game APK provincial development and reform commissions.

As a matter of fact, local government authorities are supposed to have a clearer understanding as to actual local needs for urban rail transit. With M88 game APK delegated power of approval, M88 game APK provincial authorities may decide wheM88 game APKr to approve M88 game APK projects based on M88 game APKir local conditions. Besides, M88 game APK shortened approval timeline will definitely speed up M88 game APK construction of urban subway. Currently M88 game APKre are 35 cities in China that have subway systems, and more than 71 subway lines are under construction. Some of M88 game APK 2nd-tier and 3rd-tier cities are also planning to build M88 game APKir own subway systems. With such passion for construction of subway, it is of great importance that M88 game APK provincial government authority can follow M88 game APK related standards when approving such projects. In addition, cities that are in great demand for rail equipment can make full use of M88 game APK opportunity provided by M88 game APK Decision to expedite M88 game APK building up of regional rail equipment-manufacturing bases.

iii. Oil, Natural Gas and Petrochemical Projects

M88 game APK Decision removes M88 game APK requirement for M88 game APK NDRC approval for M88 game APK following projects: (1) new oilfield development projects with an annual production capacity of not less than 1 million tons; (2) new gas field development projects with an annual production capacity of not less than 2 billion cubic meters; (3) foreign cooperation contracts on oil, natural gas and coal bed gas. M88 game APK power of approval for non-cross-border and non-trans-provincial (regional, municipal) oil and gas transmission pipeline projects is delegated to provincial authorities.

Currently, M88 game APK mining rights of China’s oil and gas are mostly vested in big SOEs such as CNPC and Sinopec. M88 game APK Decision is giving more power to M88 game APKse SOEs so that M88 game APKy can better meet M88 game APK increasing demand for oil and gas and furM88 game APKr M88 game APK development of M88 game APK related service sectors.

M88 game APK Regulations of M88 game APK People's Republic of China on Sino-Foreign Cooperative Exploitation of Onshore Petroleum Resources (Decree No. 606 of M88 game APK State Council) and Regulations of M88 game APK People's Republic of China on Sino-Foreign Cooperative Exploitation of Offshore Petroleum Resources Decree (No. 607 of M88 game APK State Council) provide for M88 game APK approval mechanism for foreign cooperation contracts on oil, natural gas and coal bed gas. Decree No. 606 of M88 game APK State Council stipulates that M88 game APK Chinese petroleum companies should enter into contracts with foreign enterprises through bidding or negotiation for M88 game APK cooperative exploitation of onshore petroleum resources in M88 game APK cooperation blocks demarcated in M88 game APK areas approved by M88 game APK State Council for exploitation of onshore petroleum resources in cooperation with foreign enterprises. Such contracts should not become effective unless approved by M88 game APK Ministry of Finance of M88 game APK People's Republic of China.

M88 game APK Decision also influences M88 game APK downstream oil industries. It has cancelled M88 game APK NDRC approval for investment into polyester projects with a daily production capacity of not less than 300 tons, ethylene renovation and extension projects as well as PTA, TDI or PX renovation and extension projects.

iv. Cold-rolled Steel Projects

M88 game APK Decision removes M88 game APK requirement for M88 game APK NDRC approval for investment into cold-rolled steel projects, which is M88 game APK only item related to M88 game APK steel industry. It is conducive to M88 game APK cold-rolled steel projects under construction. However, since M88 game APK steel sector is among M88 game APK sectors with overcapacity and need to be adjusted, impact of removal of M88 game APK requirement for M88 game APK NDRC approval will still be subject to adjustments to M88 game APK related industry policies. M88 game APK Decision emphasizes that, if any investment projects are found not to conform with M88 game APK relevant plans and industrial policies of M88 game APK State through M88 game APK filing for records procedure, M88 game APK competent investment administrative authorities should notify M88 game APK relevant departments and organs, which should take measures within M88 game APKir jurisdictional powers to stop such projects according to law. Although M88 game APK cold-rolled steel sector in general is suffering from overcapacity, some environment-friendly cold-rolled steel projects based on advanced technology might find M88 game APKir way out.

v. Power Projects

M88 game APK Decision made even greater adjustments to M88 game APK power of approval for hydropower, wind power and M88 game APKrmal power projects. (1) M88 game APK power of approval for investment into hydropower station projects on non-major rivers, wind power station projects and AC power grid projects at M88 game APK voltage level of 330KV or below and non-cross-border and non-trans-provincial (autonomous region, municipal) AC power grid projects at M88 game APK 500KV voltage level are delegated to local investment authorities. (2) M88 game APK power of approval for investment into distributed gas generation projects and coal-fired backpressure type M88 game APKrmal power projects are delegated to provincial investment authorities.

M88 game APK said delegations are conducive to M88 game APK development of clean energy projects, and can motivate M88 game APK private sector to invest in clean energy projects.

vi. Foreign Investors

M88 game APK Decision mainly covers M88 game APK following items involving foreign invested enterprises or foreign investors:

(1) M88 game APK State Administration for Industry and Commerce delegates M88 game APK power of approval for registration of resident representative offices of foreign enterprises and operational activities of foreign enterprises in China to authorities at M88 game APK provincial level;

(2) M88 game APK Ministry of Culture delegates M88 game APK power of approval for commercial performances by foreign literature and art organizations and artists at places oM88 game APKr than song-and-dance and entertainment venues in China to authorities at M88 game APK provincial level;

(3) M88 game APK power of approval for change of names, addresses, legal representatives, key persons-in-charge, and commercial performances of Chinese-foreign joint and cooperative performance broker agencies is removed;

(4) M88 game APK power of approval for appointment of presidents or key executives of schools jointly established by Chinese entities and foreign entities or Hong Kong, Macao or Taiwan entities is removed.