In recent years, with the implementation of the “Going Global” strategy, Chinese enterprises have increasingly been investing overseas. Particularly given the scarcity of resources and the strategic importance of these resources, overseas mining investments have consistently accounted for a significant share. However, as Chinese companies venture into overseas mining investments, they haven't always encountered smooth sailing; investment outcomes have often fallen short of expectations. So, how can China’s mining enterprises better “go global”? On January 3—the first working day of 2017—reporters interviewed Yang Guisheng, a senior partner at Dacheng Law Offices and a legal professional with many years of experience in overseas mining investment and mergers & acquisitions, to explore this very question. He offered insightful advice on the current development trends in the geology and mineral resources sector, especially regarding how mining companies committed to internationalization can effectively identify and mitigate targeted investment risks.

　　Yang Guisheng made a first impression on the reporter as being gentle and talkative. When the reporter directly asked how the geology and mining industry could develop more effectively—particularly how mining companies committed to international expansion could better manage targeted investment risks—Yang Guisheng replied that, from a macro perspective, the risks associated with overseas mining investments primarily encompass political risks in the host country, policy and legal risks in the host country, risks related to domestic approval and filing procedures, and risks under international law.

　　Regarding these risks, he provided a detailed explanation. The so-called political risks in the host country primarily refer to the risks arising from changes in government and fluctuations in policies caused by partisan politics—including the risk of state expropriation and official corruption—as well as the not-to-be-underestimated risk associated with community relations. The policy and legal risks in the host country mainly involve legal and policy risks related to mineral resources, foreign investment, taxation, labor and environmental protection, and foreign exchange for exports. These risks also encompass issues such as policy continuity, legal stability, and approval procedures. He emphasized that policy and legal risks often have a decisive impact on the success or failure of an entire investment project. As for domestic filing (approval) risks, they primarily involve the need for investment projects to undergo approval and filing procedures with relevant authorities, including the National Development and Reform Commission, the Ministry of Commerce, the Ministry of Natural Resources, and the State Administration of Foreign Exchange. At the same time, he pointed out that China’s legislation on overseas investment lags far behind actual practice, with major shortcomings including incomplete legislation and insufficient policy support—particularly in areas such as finance, taxation, banking, and foreign exchange—for overseas investments.

　　Regarding international legal risks, he said that our country has signed investment protection and double-taxation avoidance agreements with host countries. If the target project or company is listed internationally across borders, investors must take into account the complexities arising from stock liquidity, shareholder identities, and the cross-jurisdictional nature of the project. They will also need to address coordination issues among the laws and policies of multiple countries or jurisdictions. In addition, the geological, technical, and financial risks associated with overseas mining investments cannot be underestimated.

　　Pro Tip—Participating in international investment requires adhering to the “rules.”

　　When various risks are looming, how can mining companies clearly and purposefully use the law to safeguard their own interests? Yang Guisheng was extremely careful yet concise and to the point: “Participating in international investment requires adhering strictly to the ‘rules’ and following six fundamental principles.”

　　First, the principle of overlapping resources, geopolitics, and politics.

　　“These three factors—resources, geography, and politics—are akin to the coordinates of three dimensions. What investors need to do is pinpoint the intersection of these three dimensions and select countries that are rich in resources, relatively close to China geographically, and enjoy excellent diplomatic and political relations with China—these are the projects most suitable for businesses,” Yang Guisheng emphasized.

　　“Our country’s global mineral resource strategy prioritizes regions where significant geopolitical advantages overlap with abundant resource endowments. From a geopolitical perspective, Northeast Asia, Central Asia, South Asia, and Southeast Asia hold an important position in China’s global strategy. From a resource standpoint, these four regions are relatively rich in mineral resources—particularly Central Asia and Southeast Asia—whose minerals exhibit strong complementarity with China’s own mineral resources. Therefore, guided by the principles of complementary strengths and mutual benefit, we should jointly develop strategic partnerships that encompass resource utilization and actively promote the process of regional economic integration,” explained Yang Guisheng.

　　In addition, in Yang Guisheng’s view, aside from neighboring countries, the African region has maintained excellent political relations with China for many years. China can fully leverage this hard-won foundation of China-Africa political relations to vigorously develop China-Africa economic and trade ties, tap into and exploit Africa’s abundant mineral resources, and achieve a win-win outcome for both China and Africa. Meanwhile, South America represents another viable region that can ensure a stable supply of resources for China. In recent years, China has further strengthened its economic and trade cooperation with certain countries and regions in South America, making it highly significant to tap into and develop the mineral resources of major South American mining nations such as Brazil and Chile.

　　Second, the principle of “branching and collaboration” between the government and enterprises.

　　Yang Guisheng pointed out that China’s global mineral resource strategy should reflect national objectives and, at the same time, include practical mechanisms for concretely achieving those national objectives. The principle of “division of labor and collaboration” between the government and enterprises constitutes the practical mechanism for realizing China’s global mineral resource strategy. The principle of “division of labor” between the government and enterprises refers to the separation of governmental and corporate functions—that is, the government and enterprises play distinct roles in the implementation of the global mineral resource strategy.

　　Third, the principle of combining professional and prudent due diligence with appropriately sophisticated business transaction models.

　　As is well known, overseas mining investments entail significant legal risks and require the deep involvement of professionals such as lawyers. Legal systems and policies vary from country to country; some countries prohibit foreign enterprises or individuals from becoming controlling shareholders in certain domestic industries, while others impose restrictions on the export of specific minerals. All these factors could pose serious obstacles to the future operations and profitability of the invested entities abroad. Therefore, conducting a thorough investigation into the overall legal framework of the host country is a prerequisite for companies making overseas investment decisions.

　　For mining companies, it is essential to have professional and prudent institutions conduct comprehensive data collection and situation assessment across a wide range of areas—including the host country’s political and legislative framework, ethnic sentiments, mining and foreign investment laws and policies, law enforcement practices, environmental protection and tax policies, export controls, community labor issues, case studies from other domestic agencies, experiences from third countries, the qualifications and potential rights defects of investment or merger targets, and project prospects. Moreover, these institutions must be able to make accurate decisions and judgments based on the information gathered. Only under such a premise can companies ensure long-term compliance, stable operations, and continued forward development.

　　Fourth, the principle of localization.

　　Yang Guisheng pointed out that for any project seeking to go global, its smooth advancement in the host country first and foremost depends on the local government’s approval, support, and even empathy. Measures such as localizing labor recruitment and partner selection, and figuring out how to retain key local businesses, local teams, and customers during the acquisition process—when implemented effectively—can not only boost local economic development but also maximize the project’s benefits. Undoubtedly, this approach is precisely what the local government most hopes for.

　　Fifth, we must strengthen the principle of social responsibility. In fact, reinforcing the principle of social responsibility presents investors with an entirely new challenge. On this point, Yang Guisheng expressed his deep insight: “If we want a project to proceed successfully, it’s simply not enough to focus solely on our own economic interests. Investors must put themselves in the other party’s shoes and ask: ‘What benefits can we actually bring to them?’ Integrating into the local community, prioritizing environmental protection, paying taxes in accordance with the law, participating in charitable and public welfare initiatives, and enhancing infrastructure development—all these are not only integral parts of project investment but also meaningful contributions to the local society. Investors must work closely with the local government, thoroughly understand the government’s needs, make corresponding commitments in the areas of infrastructure and environmental protection, and pay relevant taxes and fees in strict compliance with the law. These fundamental tasks will serve as a solid foundation for ensuring the smooth progress of the project.”

　　Sixth, emphasize the principle of software development. In Yang Guisheng’s view, international investment and M&A require companies to accumulate experience over the long term and rely on the assistance of professional intermediaries to build a specialized team. He pointed out that compared to capital, what Chinese enterprises lack most when going global is precisely teams, experience, and channels. We’ve observed that in certain stages, negotiations between the two sides can drag on for an extended period, yet ultimately remain merely theoretical discussions. The effect of teamwork cannot be achieved in just one or two years; rather, it takes a decade of painstaking effort to truly hone one’s skills. Therefore, in software development, in addition to cultivating internal corporate teams—such as through information sharing and industry forum exchanges—these activities also provide valuable channels for building enterprise teams.

　　In just a short while, Yang Guisheng laid out the six fundamental principles of overseas investment in a remarkably clear and organized manner. Throughout his many years as a lawyer, these principles had probably already been deeply ingrained in his mind. This insight is precisely what he offers to domestic enterprises considering overseas investments. As a lawyer himself, it’s precisely because he thoroughly understands these principles that he has achieved one remarkable milestone after another throughout his career.

　　He told the reporter that only professional lawyers can provide professional services. He shared a real-life case with the reporter: In 2014, lawyer Yang Guisheng, representing a mainland investment company listed in Hong Kong, was tasked with acquiring a granite mining project. According to an asset valuation report issued by an authoritative institution provided by the target company, the mine’s reserves were estimated at tens of millions of cubic meters, with a value exceeding hundreds of billions of yuan. However, upon visiting the mine site himself, Yang Guisheng found that the so-called “granite mine with reserves of tens of millions of cubic meters” was nothing more than a small hill. His professional intuition immediately alerted him that “there might be something fishy going on here.” Yang Guisheng promptly launched an investigation. After carefully studying the geological reports on reserve verification, the review opinions, and the filing certificates from the competent administrative authority for land and resources, he clearly pointed out that the actual reserves of the mine did not exceed 200,000 cubic meters. The acquiring party simply refused to believe this figure. Under Yang Guisheng’s persistent insistence, all parties convened a “three-party joint inspection” meeting at the mine site to verify the reserves. Ultimately, confronted with the evidence Yang Guisheng presented, the acquiring party had no choice but to admit that the reserve figures provided earlier were inaccurate.

　　Yang Guisheng’s professional expertise has saved the acquiring party from losses amounting to tens of millions, even over 100 million yuan. As for this, he explains: “When everyone says something is right, I ask myself whether it really is right; and when everyone says something is wrong, I take a moment to think carefully and see whether it really is wrong.” In his view, this is the key factor that determines the height of a lawyer’s practice.

　　In recent years, lawyer Yang Guisheng and his Dacheng team have provided legal services to a number of companies involved in cross-border investments in mineral resources, including: China Railway Resources Group, China National Nuclear Corporation, China Communications Construction Company, Nanjing Iron and Steel Group, CITIC Group, Shandong Gold Group, South Africa’s Industrial Development Corporation, Chongqing Bureau of Geological Exploration, Hunan Coalfield Geological Bureau, Hunan Development Group, Sichuan Development Group, Guizhou Energy & Mineral Resources Group, and Inner Mongolia Mining Group.

　　From Yang Guisheng’s client list, it’s clear that his deep passion for mineral resource law has become ingrained in his very being—and it also vividly demonstrates his achievements and standing in the field of mineral resource law.

　　Action Strategy—To go global, we need to persist in diversified expansion and adopt a multi-pronged approach.

　　After a comprehensive analysis of the risk factors associated with overseas investment, Yang Guisheng advises Chinese enterprises, as they embark on the path of overseas investment and mergers & acquisitions for expansion: “In choosing an overseas investment strategy, we must adopt a multi-pronged approach that combines trade, exploration, and development. In selecting mineral resources, we should focus on strategic minerals and major pillar minerals that are in short supply in China, adhering to the principles of filling gaps, addressing shortages, and improving quality. In terms of operational mechanisms, we must remain market-oriented, center our efforts on economic benefits, treat enterprises as the main investors, and pursue diversified development.”

　　At the same time, he expressed caution in participating in the risk exploration market. The main challenges China faces in entering the international risk exploration market are as follows: First, the risks are too high; second, China has yet to develop a robust commercial culture for exploration, and its risk capital market is still underdeveloped. Moreover, at present, the country does not have comprehensive incentive policies—such as those adopted by major Western powers—for overseas risk exploration. Therefore, when adopting the risk exploration approach, we must first adhere to the principle of moderation and avoid spreading our efforts too thinly across all fronts. Second, the mineral types that China should focus on when investing through this approach are best limited to highly profitable resources like gold and diamonds. Third, the government should provide moderate financial support.

　　In addition, it is important to actively acquire mining rights. He pointed out that, compared to risk exploration, acquiring mining rights carries relatively lower risks. Currently, there are two major challenges in China when adopting this approach: First, there is a severe lack of funding. Some outstanding large-scale mining projects internationally often require tens of millions or even hundreds of millions of dollars; without sufficient financial backing and secure, stable financing channels, most companies can only stand by and watch helplessly. Second, there is a shortage of talent and managerial expertise. Compared with the many years of experience accumulated by multinational mining companies from countries such as Canada, Australia, Japan, and South Korea, Chinese enterprises are still at a very early stage and will need to build up successful experiences over the long term.

　　He suggested that when acquiring mining rights, one should start with relatively smaller-scale projects and carefully select high-quality ones. Moreover, the types of minerals targeted under this approach would ideally be limited to those in which China currently faces relatively acute shortages—such as oil, iron ore, copper, manganese ore, potash, and chromite. Secondly, in terms of trade and imports, we should optimize the variety of mineral resources by expanding imports of primary raw ores or semi-processed mineral products, striving as much as possible to maintain long-term supply contracts and diversifying import sources.

　　On some minor details, Yang Guisheng does not merely skim over them; he has paid meticulous attention to every single detail in order to provide reference for decision-makers at Chinese mining enterprises investing overseas.

　　For instance, in terms of operational models, we should combine direct investment with capital operations. In developed regions such as Canada, Australia, and South Africa, where superior resources have already been controlled by countries like the U.S., Europe, Japan, and South Korea, Chinese investors should primarily focus on capital operations, including mergers and acquisitions of mining companies. In less developed regions such as Africa, Latin America, and Central Asia, direct investment in mineral rights should take the lead. As for business models, we should emphasize joint ventures and localized operations, while flexibly managing controlling stakes and minority equity positions. In terms of investment entities, both state-owned and private enterprises should be given equal importance; private enterprises should take the lead initially, with state-owned enterprises subsequently investing and forming mixed-ownership enterprises led by large corporations. Alternatively, geological exploration units could take the lead, completing acquisitions first, after which the government would guide state-owned enterprises to integrate these exploration units. Regarding mineral rights management, the exploration and mining model should prioritize risk-based prospecting and technical service contracting, followed closely by mineral rights investments and mergers and acquisitions. Specifically, when tapping into foreign mineral resources, we should jointly acquire mining rights, conduct joint exploration and development, and ultimately secure outright ownership of mining equity. Starting from risk-based exploration, once a deposit is discovered, we can then proceed independently with development—adopting a three-pronged approach.

　　Facing one multinational mega-project after another, lawyer Yang Guisheng has already turned his gaze toward the vast global stage. He says that China has become the world’s second-largest capital-exporting country and, in a few years, may even surpass the United States to become the world’s largest capital-exporting nation. International cooperation, international investment, cross-border mergers and acquisitions, and the legal services associated with them will also become key trends in the development of the legal profession.