China’s Regulation on Outbound Investment Enters into Force

On 1 July 2026, State Council Regulation No. 837 on Outbound Investment entered into force (the “Regulation”). The Regulation establishes a general legal framework governing outbound investment by Chinese investors, including mechanisms for regulatory oversight, protection and liability.

Before the Regulation was adopted, outbound investment was primarily governed by regulatory instruments issued by the National Development and Reform Commission of the PRC and the Ministry of Commerce of the PRC. The new Regulation does not repeal the procedures established under those instruments. Instead, it consolidates them and sets out the principal rules and mechanisms governing outbound investment. Both previously adopted and future regulatory instruments in this area must comply with the Regulation.

What Constitutes Outbound Investment

Under Article 2 of the Regulation, outbound investment means an activity whereby an investor, by contributing assets or property rights, providing financing, granting guarantees or by other means, directly or indirectly acquires any of the following rights or interests in relation to an enterprise or property located in another country or region:

ownership rights;
control;
management rights;
other related rights and interests.

The definition therefore covers, among other things:

establishing a company outside China;
acquiring shares, equity interests or assets of a foreign entity;
establishing a joint venture;
making an indirect investment through a foreign holding company or another intermediary structure;
providing financing linked to the acquisition of corporate, management or other rights;
granting a guarantee as part of a structure involving the acquisition of control or other rights in relation to a foreign enterprise or asset;
acquiring rights through contractual arrangements, trust structures or other mechanisms that do not involve a direct acquisition of shares;
subsequently reinvesting abroad assets and rights previously acquired through an outbound investment.

Not every contribution of assets or provision of financing, such as a loan or guarantee, constitutes outbound investment. To fall within the definition, the investment must serve as a means of acquiring control, management rights or another interest in relation to a foreign enterprise or asset. Ordinary commercial lending that is not connected with the acquisition of ownership, control, management or other rights in relation to a foreign enterprise or asset does not constitute outbound investment.

Particular attention should be paid to instruments that are formally structured as financing but, in substance, give the investor the ability to influence a foreign company. These may include convertible loans, financing accompanied by a right to acquire an equity interest, options, share pledges, agreements granting the creditor enhanced project-management rights and other hybrid instruments.

The Regulation applies to enterprises, other Chinese organisations and citizens of the PRC.

Unless otherwise provided by specific rules, the Regulation also applies to investments made by Chinese investors in Hong Kong, Macao and Taiwan.

Regulatory Oversight of Outbound Investment

The Regulation establishes a review system for outbound investments that affect or may affect the national security of the PRC.

Article 12 provides that investors must obtain approvals, complete record-filing procedures, submit information and register cross-border movements of funds where required under the applicable rules.

Reviews are conducted by the National Development and Reform Commission of the PRC and the Ministry of Commerce of the PRC jointly with other competent authorities under the State Council. Investors and other relevant persons must provide the required information, cooperate with the review and comply with decisions made following the review.

A review may cover not only the initial implementation of an investment, but also the subsequent transfer or other disposal of foreign assets and rights connected with that investment. Accordingly, the exit of a Chinese investor from a foreign project, reinvestment, changes in equity interests and changes to instruments of control may also potentially be subject to regulatory scrutiny.

At present, however, the Regulation does not establish detailed criteria for determining whether a project affects national security, the applicable review periods or the detailed procedure for interaction with the competent authorities.

Transfer of Technologies and Data in Practice

Article 13 prohibits the use of outbound investment to transfer outside the PRC goods, technologies, services and related data whose export is prohibited.

Where the export of a relevant item is restricted, it may be transferred only after the required authorisation has been obtained.

The prohibition applies not only to an ordinary supply of goods or the formal transfer of technology, but also to other methods of transferring the relevant items in practice, including:

sending technical specialists abroad;
arranging for employees to work in another country;
providing cross-border technical assistance;
conducting training or professional instruction abroad.

Accordingly, export control may apply not only to a technology-assignment agreement or licence agreement, but also to the actual transfer of knowledge, production methods, software solutions, documentation or data in the course of implementing a foreign project.

New Requirements for the Management of Foreign Companies

The Regulation imposes obligations not only on Chinese investors, but also in relation to enterprises established or acquired by them abroad. Investors must ensure that a project is properly managed both during its implementation and throughout its subsequent operation.

Such enterprises must:

establish an appropriate corporate governance structure;
implement a legal and regulatory compliance system;
establish an internal control system;
ensure operational and workplace safety;
develop emergency-response procedures;
identify and assess compliance risks;
protect the safety of employees and property;
refrain from damaging the business reputation of other investors;
refrain from infringing the trade secrets of other persons;
refrain from engaging in price dumping in the relevant product market.

Protection of the National Security of the PRC

The Regulation separately addresses the disclosure of documents outside the PRC.

Where a Chinese organisation or individual is involved in litigation or arbitration relating to an outbound investment, or is subject to an investigation by a foreign judicial or law-enforcement authority, the provision of evidence and other materials must comply with PRC legislation governing:

state secrets;
data security;
personal information protection;
technology exports;
export control;
international judicial assistance.

Where permission from a Chinese governmental authority is required for the provision of documents, the relevant materials must not be disclosed outside the PRC until the applicable procedure has been completed.

State Support and Protection of Outbound Investors

The Regulation also governs state support for Chinese investors.

Government authorities must conduct risk assessments, publish warnings concerning conditions in foreign countries and assist investors in protecting their employees and property.

The Regulation also provides for international cooperation, the conclusion of bilateral and multilateral investment agreements, consular protection and assistance for Chinese citizens, organisations and employees involved in foreign projects.

In the event of war, widespread civil unrest, a terrorist threat, an epidemic or another emergency, Chinese diplomatic missions and institutions abroad must promptly assess the situation, urge the relevant country or region to adopt effective measures to protect the personal safety and property of Chinese investors, and provide assistance as appropriate in the circumstances.

Countermeasures Against Foreign Restrictions

A separate section of the Regulation concerns the protection of Chinese investors against restrictions imposed by foreign states and organisations.

Where an investor encounters investment barriers or other trade-related obstacles, the Ministry of Commerce of the PRC may conduct an investigation. Following such an investigation, the Chinese authorities may adjust investment policy in relation to the relevant country and impose restrictions on the export or import of goods, technologies or cross-border trade in services.

Where a foreign state, region or international organisation imposes discriminatory prohibitions or restrictions against the PRC or Chinese investors, the Chinese authorities may adopt corresponding countermeasures. Foreign organisations and individuals that have directly or indirectly participated in the development, adoption or implementation of such restrictions may be included on a list of persons subject to measures under the PRC Anti-Foreign Sanctions Law.

Restrictions may also be imposed on foreign persons that:

threaten the sovereignty, security or development interests of the PRC;
terminate transactions with Chinese companies, organisations or citizens in a manner contrary to ordinary market principles;
apply discriminatory measures against Chinese investors;
unjustifiably deprive Chinese investors of their lawful rights or restrict those rights.

The available measures include restrictions on trade with the PRC, investment in the PRC, transactions and cooperation with Chinese persons, the entry of goods and vehicles into the PRC, and the entry, stay and employment of individuals in the PRC.

Such measures may also extend to organisations controlled by the relevant foreign person or established or managed with that person’s participation.

Liability of Investors

The Regulation significantly strengthens the penalties for violations of the rules governing outbound investment.

Where an investor uses an outbound investment to transfer goods, technologies, services or data whose export is prohibited, the National Development and Reform Commission of the PRC or the Ministry of Commerce of the PRC may require the investor to:

cease the investment activity;
dispose of equity interests or other assets within a specified period;
cease holding the relevant rights;
surrender any unlawfully obtained income to the state.

Failure to comply with such an order may result in a fine equal to between 0.5% and 1% of the amount invested. Managers and other directly responsible persons may be fined between RMB 50,000 and RMB 100,000.

Where an investor fails to obtain a mandatory approval or complete a required record-filing procedure, submits false documents or conceals material information, a fine equal to between 0.1% and 0.5% of the amount invested may be imposed.

If the violation is not remedied, the investor may be ordered to terminate the outbound investment and dispose of the relevant equity interests or assets. The fine may be increased to between 0.5% and 1% of the amount invested. Directly responsible persons may be fined between RMB 20,000 and RMB 50,000.

Obtaining an approval or completing a record-filing procedure through bribery, fraud or other unlawful means may result in the revocation of the relevant approval, confiscation of unlawfully obtained income and the imposition of equivalent financial penalties.

The competent authorities may additionally:

refuse to accept the investor’s applications for approval or record-filing of new outbound investments for a period of three years;
prohibit the investor from making outbound investments for a period of between one and three years.

Refusal to cooperate with a national security review, concealment of information or failure to comply with a decision made following the review may result in an order to remedy the violation, confiscation of unlawfully obtained income and a fine.

Where a violation poses a threat to national security, the investor may be prohibited from making outbound investments for a period of between one and three years. An investment already made may be terminated, with the investor being required to dispose of the relevant equity interests or assets.

A breach of the rules on fair and responsible business conduct may also result in a prohibition on outbound investment for a period of between one and three years where the investor’s conduct has caused adverse consequences.

In addition to the specific sanctions provided for by the Regulation, civil, administrative and criminal liability may arise under other provisions of PRC law.

The Regulation also provides for liability of public officials for abuse of authority and unlawful disclosure of state, official or commercial secrets, personal information and other protected information.

Matters to Be Considered When Structuring Transactions

The broad definition of outbound investment substantially expands the range of transactions that must be assessed from the perspective of Chinese regulatory requirements.

When preparing a project involving a Chinese investor, it is necessary to determine:

whether the Chinese party’s participation in the project or transaction constitutes outbound investment under PRC law;
whether the transaction provides for debt-to-equity conversion, options, pledges over equity interests, rights to appoint management or other mechanisms enabling influence over a foreign company;
whether the investment involves goods, technologies, services or data whose export from the PRC is prohibited or restricted;
whether approval or record-filing with the National Development and Reform Commission of the PRC or the Ministry of Commerce of the PRC is required;
whether the project involves the transfer of technology, technical documentation, software or data, or the deployment of specialists abroad;
whether the project falls within the scope of PRC rules governing national security, state secrets, data security or related matters.

Chinese investors and their counterparties should address these issues at an early stage when structuring an investment project.

It may be necessary to include in the transaction documents conditions precedent relating to the receipt of approvals from the competent Chinese authorities, representations and warranties concerning compliance with applicable PRC law, obligations of the parties to cooperate in completing the required procedures, and a long-stop date for obtaining the relevant approvals.

Official text of the State Council Regulation on Outbound Investment:

https://www.gov.cn/zhengce/content/202606/content_7070755.htm