Jurisdiction - China
Reports and Analysis
China – SAFE Eases Formalities For Foreign Direct Investment.

9 January, 2013

 

 

On 19 November 2012, the State Administration of Foreign Exchange (“SAFE”) promulgated the Notice on Further Improvement and Adjustment of Foreign Exchange Administration Policies Concerning Direct Investment (“Notice”), which came into force on 17 December 2012.


Due to China’s strict foreign exchange controls, foreign direct investment (“FDI”) is subject to various formalities with the SAFE. Following the promulgation of the Notice, many procedures and formalities with the SAFE relating to FDI will be considerably simplified. The key improvements are set out in the table below. 

 

Formalities Improvements

Opening of foreign exchange bank 
accounts to receive up-front costs, 
capital contributions, sales price for 
transfer of assets and deposits

Prior approval no longer required

Re-investment with legitimate 
income generated by foreign 
investors in China (e.g. distributed 
profits, proceeds from transfer 
of equity interests, reduction of 
registered capital, liquidations, etc)

Prior approval no longer required

Increasing registered capital with 
capital reserves, surplus reserves 
or undistributed profits of foreign 
investors or with foreign debts 
borrowed from foreign investors

Prior approval no longer required

Foreign exchange registration for 
domestic companies invested by 
foreign invested holding companies, 
foreign invested venture capital 
companies or foreign invested 
equity investment companies

Registration no longer required if 
the domestic company does not 
have any foreign investors

Funds transfer between foreign 
invested holding companies, 
foreign invested venture capital 
companies or foreign invested 
equity investment companies and 
the domestic companies invested by 
them

Prior approval no longer required

Repatriation of proceeds from the 
reduction of registered capital or 
liquidation of a foreign invested 
enterprise to foreign investors

Prior approval no longer required
Granting loans to foreign investors Loans granted by foreign invested 
enterprises to their overseas parent 
companies are now permitted and 
loans in foreign currencies borrowed 
by foreign invested enterprises 
within China can be used for this 
purpose

 

The SAFE has also issued two sets of detailed procedures for its local offices and banks to follow when handling the relevant SAFE formalities in connection with FDI. The costs and burden on foreign invested enterprises and foreign investors will hopefully be reduced after the simplified procedures start to be adopted.

 

 
For further information about this article, please contact:
 
Carrie Yang, Partner, Clyde & Co
carrie.yang@clydeco.com.cn
 
Amanda Li, Clyde & Co
amanda.li@clydeco.com.cn
 

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