SAFE further eases control over FDI and cross-border capital account transactions

On September 12, 2025, the State Administration of Foreign Exchange (SAFE) of the People’s Republic of China released the Notice on Deepening Reform of Foreign Exchange Administration for Cross-Border Investment and Financing (in Chinese: 国家外汇管理局关于深化跨境投融资外汇管理改革有关事宜的通知) (the Notice), which took immediate effect. The Notice demonstrates SAFE’s continued efforts to facilitate foreign direct investment (FDI), cross-border financing and other capital account transactions, building on previous measures to streamline administrative procedures for foreign investors.

We set out below the key changes under the Notice which may be of particular interest to foreign investors:

SAFE registration formality for pre-establishment funding is removed

Previously, a foreign investor was required to complete SAFE “basic information registration for remitting preliminary funds” before opening a foreign exchange account in China. The account may be used to receive funds from the foreign investor to cover expenses on market research, an office lease and other preliminary costs before the Chinese legal entity is set up.

According to the Notice, a foreign investor may now remit funds into a bank account opened with a local bank at the location in which the new foreign-invested enterprise (FIE) will be incorporated directly, without having to conduct the SAFE registration first.

Elimination of SAFE registration for onshore reinvestment by FIEs (nationwide expansion)

Non-investment-type FIEs have been allowed to make equity investment in China by using their registered capital since 2019. Under the previous rules, when an FIE uses its registered capital for further investment, the domestic target company and/or the seller was required to conduct a SAFE registration, namely “registration/change registration of basic information for receiving domestic reinvestment”, before the target company or the seller is able to receive the transaction price from the foreign investor. 

The Notice removes this SAFE registration requirement. The transaction price can now be paid by the FIE directly to the bank account of the target company or the seller.

This reform simplifies the process for FIEs to make further capital investment in China, facilitating onshore reinvestment, merger and acquisition transactions. Whilst this reform had already been piloted in a few selected provinces and cities in China, the Notice marks its official nationwide rollout. 

Foreign currency profits generated onshore may now be used for domestic reinvestment

For the first time, the Notice explicitly permits FIEs or foreign investors to use their foreign currency profits generated in China for domestic reinvestment. In principle, the amount available for reinvestment by FIEs should not exceed the balance of undistributed profits as shown in the company’s most recent audited financial statements, and the amount available for foreign investors should not exceed the amount of distributed foreign currency dividends to the investor.

The transaction price for such investment may be credited to the relevant capital account of the target company and/or the seller directly.

According to SAFE’s implementation guidelines (attached to the Notice), various supporting documents are required to be provided by FIEs or foreign investors to evidence the source of funds used for the investment, including, amongst others: 

• documents proving the authenticity of profits legally earned in China, such as audited financial report(s), shareholders’ or board resolutions approving the profit distribution and relevant tax filing documents; and

• documents evidencing the authenticity of the reinvestment transaction itself, such as an investment agreement or equity transfer agreement.

This reform will further enhance the flexibility of profit utilization for FIEs / foreign investors and facilitate merger and acquisition activities in China.

         Further cross-border financing available to qualified high-tech companies

The Notice further upgrades the policies for facilitating the convenience of cross-border financing specifically available to eligible technology enterprises. In 2018, China launched a pilot program which enabled Chinese high-tech enterprises greater ease in accessing cross-border financing in order to promote technology innovation. This pilot program was officially implemented nationwide in 2023.

The eligible participants currently include (a) high-tech enterprises, (b) “specialized and innovative” enterprises; and (c) technology-based small- and medium-sized enterprises (SMEs). Pursuant to the Notice, eligible participants are now all granted a foreign debt quota of up to USD$10 million (or its equivalent in another other currency), whilst certain selected enterprises are eligible for a foreign debt quota of up to USD$20 million (or its equivalent in another other currency).

For context, an enterprise in China is generally subject to quota control on the amount of foreign debt that it can borrow from foreign entities and such quota is determined according to various indicators (e.g. net asset value of the borrower).

The Notice also simplifies the documents required for SAFE registration of the foreign debts.

         The “negative list” on the use of capital account revenues is shortened

Current SAFE rules contain a “negative list” setting out the items that capital account funds cannot be used for, including purchase of residential properties that are not for self-use purpose. Capital account funds include injected registered capital, foreign debts proceeds and RMB funds converted from such amounts.

The Notice re-emphasizes that non-financial enterprises should continue to follow the principles of authenticity and self-use in the use of their capital account funds, and more specifically:

• such funds must not be used, directly or indirectly, for expenditure prohibited by national laws and regulations;
• unless expressly permitted, such funds must not be used, directly or indirectly, for securities investment or other investment and wealth management products (except for wealth management products and structured deposits with a risk rating of no higher than level 2); and

• unless the business scope allows, such funds must not be used to grant loans to non-affiliated enterprises.

Purchase of residential properties that are not for “self-use purpose” contained in the previous negative list was removed under the Notice, which suggests that FIEs are now permitted to purchase residential properties for non-self-use purposes.

         Greater flexibility for expatriates in China when purchasing real estate properties in China

Under the Notice, expatriates living in China who are eligible to purchase real estate properties may now convert their foreign currency income into RMB and pay the purchase price under a real estate property purchase contract before obtaining the real estate filing certificate from the competent real estate authority (which was previously required as a condition to payment of the purchase price). While this method does not alter the substantive housing policies (pursuant to which foreign nationals are highly restricted from purchasing real estate properties in China unless explicitly permitted), this procedural adjustment facilitates expatriates’ home purchases in China.

The Notice signals China’s continued efforts to liberalize restrictions over cross-border capital account transactions, promoting innovation-driven growth and enhancing China’s position as a destination for foreign investments.