* NDRC says will provide guidance to Chinese firms going abroad
* Aims to prevent “vicious” competition and corruption among firms
* M&A by Chinese firms in Belt and Road countries is soaring
* China cabinet says overseas investment will be categorized as encouraged, restricted and forbidden (Adds State Council notice on overseas investment)
BEIJING/SHANGHAI, Aug 18 (Reuters) - China will strengthen rules to defuse risks for domestic companies investing abroad and curb “irrational” overseas investment in its Belt and Road initiative, the state planner said on Friday.
The National Development and Reform Commission (NDRC) said in an online statement lauding the Belt and Road initiative that it would provide better guidance on risks to companies investing overseas in order to prevent “vicious” competition and corruption.
The initiative is aimed at building a modern-day “Silk Road”, connecting China by land and sea to Southeast, South and Central Asia, and beyond to the Middle East, Europe and Africa.
The state planner cited unspecified security risks for Chinese companies investing abroad.
The NDRC did not give more details about how it planned to strengthen rules or why it was concerned about corruption and unhealthy competition between companies.
Also on Friday, the cabinet issued new guidelines to regulate overseas investment as the government looks to support capable firms investing overseas while restricting or banning deals in certain sectors.
“(We will) guide firms to fully consider national conditions and actual needs of target countries, pay attention to mutually beneficial cooperation with local governments and companies, and generate economic and social benefits,” the State Council said in a statement.
Mergers and acquisitions by Chinese companies in countries linked to the Belt and Road initiative have been growing at a rapid rate, even as the government takes aim at China’s acquisitive conglomerates to restrict capital outflows.
Unveiled in 2013, the Belt and Road initiative has also come with some security concerns for China. This year, militants in Pakistan, a key Belt and Road partner, killed 10 workers and two teachers from China.
The largest deal in a Belt and Road country this year was a Chinese consortium’s $11.6 billion buyout of the Singapore-based Global Logistics Properties.
Chinese acquisitions in the 68 countries officially associated with President Xi Jinping’s signature foreign policy totalled $33 billion as of Aug. 14, surpassing the $31 billion for all of 2016, according to Thomson Reuters data.
Lawyers and dealmakers had told Reuters that companies were enjoying a relatively smooth approval process for Belt and Road-related deals as regulators tended to classify them differently when reviewing outbound investments.
China has tightened outbound capital controls and cracked down on overseas deals it sees as risky, putting pressure on acquisitive conglomerates like Anbang Insurance Group , HNA Group, Dalian Wanda Group and Fosun International Ltd (0656.HK).
In the statement Friday, the NDRC cited projects such as a high-speed railway in Indonesia and a crude oil pipeline between southwest China and Myanmar as examples of how the initiative was advancing.
Up to the end of 2016, Chinese companies had invested more than $18.5 billion to build economic and trade cooperation zones in 20 countries along the Belt and Route routes, it said.
The State Council said capable firms were encouraged to invest overseas in sectors including agriculture and high-tech manufacturing, while mining, oil, and gas developments based on “prudent assessments” are also encouraged.
It reiterated that investment in property, hotels, entertainment, sports club, and film industries would be restricted, as will investment projects that do not meet environmental protection or safety standards.
Investment in gambling and pornography, and some core defence technologies, and those that use technology not permitted for export are forbidden, the State Council said. (Reporting by Brenda Goh in SHANGHAI and Elias Glenn in Beijing; Editing by Philip McClellan)