China further liberalized cross-border investment and trade

23 Oct 2019

On 23 October 2019, the State Administration of Foreign Exchange of China (SAFE) issued the Circular on Further Promoting the Facilitation of Cross-border Trade and Investment (Hui Fa [2019] No.28) (the "Circular 28"). The Circular 28 aims to further liberalizing and streamlining foreign exchange control over cross-border investment and trade. Before the Circular 28, only foreign-controlled enterprises with the explicit term "investment" in their business scope, e.g., a China investment holding company ("CHC"), were allowed to utilize their registered capital for further equity investment in China. Now, any foreign-controlled enterprise is allowed to utilise and convert the capital received from foreign investors for making equity investment in China, provided that certain conditions are fulfilled.

Under the Circular 28, domestic companies in pilot areas are no longer required to provide supporting documents to banks for verification before using the funds received under capital account items on a case-by-case basis.

The Circular 28 has also simplified the use of funds under certain foreign direct investment related accounts.