Re-introducing debt-equity ratio control for foreign-invested enterprises?
Earlier this month (December 2012), the Prime Minister issued Directive 32 to various ministries to instruct the ministries to remove obstacles to increase investment efficiency. The Prime Minister instructed the State Bank to focus on developing a mechanism to monitor the total amount of domestic and foreign loans in comparison with the total investment capital of foreign direct investment projects. It seems that the Prime Minister now wants to re-introduce debt-equity ratio control for foreign-invested enterprises. Before 2006, under the old Foreign Investment Law, a foreign invested enterprise’s owner equity must be at least 30% of the total investment capital of a project.