On June 1, 2026, the State Council promulgated the Regulation of the State Council on Outbound Investment (State Council Order No. 837, hereinafter referred to as the New Regulation), which shall take effect on July 1, 2026. As China’s first dedicated administrative regulation governing outbound investment, it is a systematic upgrade of departmental rules in terms of its regulatory hierarchy, coverage, logical framework and legal liabilities. It also represents a new phase in China’s outbound investment governance that balances development and security.
I. Background
For years, China’s outbound investment governance has operated under a fragmented, sector-based supervisory model. Development and reform authorities oversee project management, commerce authorities regulate overseas institutional operations, and foreign exchange authorities administer cross-border fund remittance for outbound direct investment. While these three supervisory bodies perform distinct functions, China has lacked a unified, top-tier institutional framework covering all dimensions of outbound investment governance.
Against a backdrop of escalating geopolitical friction, investment screening barriers and unilateral sanctions have been imposed across different jurisdictions. Multiple European economies have recently rolled out stringent foreign investment regulatory updates, departing from the principle of non-retroactivity of laws. They have launched retrospective reviews on lawfully completed and compliant Chinese-funded overseas investment projects, forcing Chinese enterprises to divest overseas equity and dispose of existing assets. Cross-border asset security risks have become increasingly salient, exposing Chinese investors to heightened external uncertainties in their global outbound investments. After decades of global expansion, China has gained extensive experience in international investment cooperation, yet it faces persistent bottlenecks in cross-border compliance, asset safety and overseas regulatory adaptation. This has created an urgent need for national unified top-tier outbound investment rules, strengthened risk prevention and control measures, and enhanced coordinated countermeasure capabilities.
According to the 2024 Statistical Bulletin of China’s Outbound Foreign Direct Investment, jointly released by the Ministry of Commerce, the National Bureau of Statistics and the State Administration of Foreign Exchange, China’s outbound foreign direct investment stocks rank among the world’s top three. By the end of 2024, Chinese-invested overseas institutions had a global presence in over 80% of countries and regions. The expansion of China’s outbound investment has further integrated the country into global investment governance. It has also laid a solid foundation for China to raise its voice in shaping international economic and investment rules, build institutional mechanisms to counter overseas restrictive measures, and safeguard its core legitimate rights and interests in cross-border investment and economic activities.
This New Regulation balances development and security. It incorporates core regulatory mechanisms including national security reviews, export controls, cross-border data compliance, cross-border dispute resolution and responses to foreign sanctions and forms a comprehensive national governance system for cross-border investment. The regulation not only provides institutional guarantees and operational guidance for Chinese enterprises to conduct high-quality overseas investment and expansion, but it also establishes standardized mechanisms to address discriminatory overseas policies and unilateral restrictive measures. It achieves the integrated coordination of four core dimensions: outbound business expansion, risk prevention and control, legitimate rights and interests protection, and external countervailing governance.
II. Core Changes
Compared with the existing regulatory rules, the New Regulation has achieved an all-round iteration and upgrade, with the following core reform highlights:
(I) Upgrade of Regulatory Hierarchy
For a long time, China’s outbound investment oversight has primarily relied on two departmental rules: the Ministry of Commerce’s Decree No. 3 of 2014 and the National Development and Reform Commission’s Decree No. 11 of 2017. These lower-tier provisions only support vertical supervision within individual authorities, resulting in fragmented and inconsistent regulatory practices. Building on years of sectoral governance, the New Regulation establishes unified national top-tier regulatory standards. It provides a robust legal basis for the competent authorities covering development and reform, commerce, foreign exchange, foreign affairs and customs to formulate supporting implementation rules and build a coordinated, modernized outbound investment governance system.
(II) Expansion of Regulatory Scope
The previous regulatory regime featured segmented supervision by the development, reform, commerce and foreign exchange authorities, which focused on project approval and filing, overseas institution registration, foreign exchange verification and remittance for outbound investment, resulting in incomplete regulatory coverage. The New Regulation breaks with this siloed supervisory model and builds a full-spectrum compliance governance system. It aligns domestic regulatory requirements with international supervisory practices covering national security reviews, export controls, cross-border data compliance and foreign sanction responses. It effectively counters the discriminatory screenings and restrictive measures imposed by major Western jurisdictions on Chinese outbound investment, strengthens the protection of China’s sensitive assets, core technologies and key industrial sectors, and provides regulatory tools for competent authorities to respond to unfair overseas restrictions on Chinese investment.
(III) Optimization of Regulatory Logic
China’s outbound investment governance has traditionally adopted a supervision-centric model, prioritizing ex-ante review and filing, supplemented by in-process procedural updates and ex-post annual compliance declarations. This model is no longer adaptive to the complex, intertwined dynamics of contemporary global cross-border investment.
The New Regulation optimizes the traditional supervision-oriented compliance model by building a collaborative service system involving governments, financial institutions, professional service agencies and industry associations. It fills the gap in the public service support for enterprises’ overseas layout and facilitates high-quality outbound investment. It also improves institutional mechanisms for overseas investment risk early warnings, trade barrier investigations and cross-border dispute resolutions, fully protecting enterprises’ overseas assets and their legitimate business rights and interests. It effectively docks with foreign-related legal systems such as the Anti-Foreign Sanctions Law, further enhancing China’s influence in global investment governance and its capacity to safeguard and balance cross-border economic rights and interests.
(IV) National Security and Anti-Monopoly
Article 15 of the New Regulation mandates the improvement of the outbound investment security review system. Security reviews apply to all outbound investment activities and related asset and right transfers that affect or may affect national security. Any outbound investment detrimental to national security will be ordered to eliminate the associated security risks. Violators may be barred from conducting outbound investment activities for one to three years, and ongoing non-compliant investments may be subject to mandatory suspension and timed asset and equity divestment orders.
This outbound investment security review system complements China’s two-way cross-border investment security governance framework, which previously only covered inbound investment security screening. It effectively prevents market entities from evading inbound security review requirements through corporate restructuring and disguised transactions. Notably, the review scope covers not only standalone outbound investment projects, but also the transfer and disposal of relevant assets and rights. This provision responds partially to restrictive overseas investment policies, such as the U.S. bans on domestic entities’ investment in China’s semiconductor, microelectronics, quantum technology and artificial intelligence sectors.
The New Regulation embeds national security principles throughout outbound investment administration, requiring all investors to avoid actions that compromise China’s national security, national interests or public interests. While prior regulatory reviews incorporated partial security assessments, the New Regulation comprehensively integrates national security oversight across the entire investment review workflow, covering foreign exchange registration, technology export supervision and market concentration reviews.
Regarding antitrust compliance, the New Regulation requires investors to uphold fair competition and refrain from distorting the market order in outbound investment activities. Whether these declaratory provisions impose mandatory obligations on enterprises to comply with overseas competition and antitrust laws remains subject to further judicial interpretation and supporting implementing rules.
(V) Technology Export Control
Article 13 prohibits investors engaged in outbound investment from exporting or utilizing prohibited goods, technologies, services and relevant data. It also bans the unauthorized export or use of restricted goods, technologies, services and data. The regulation further clarifies export control jurisdictional scope by covering restrictive conduct implemented via cross-border staffing, offshore work deployment, technical guidance and transnational training. It achieves institutional alignment with the existing regulatory systems governing controlled technologies and dual-use items.
(VI) Investigations and Countermeasures
Article 23 stipulates that where investors encounter investment barriers or operational obstacles in host jurisdictions, the Ministry of Commerce may initiate independent or coordinated official investigations, with relevant entities and individuals obligated to provide full assistance and cooperation. This provision covers mainstream investment screening mechanisms adopted by the United States, the European Union and the United Kingdom.
Under Article 24, if any country or international organization imposes discriminatory prohibitions, restrictions or restrictive measures on China’s investment and operational activities, Chinese authorities may adopt corresponding countermeasures, including listing participating entities and individuals on the official countermeasure list. Foreign governments and entities that obstruct legitimate outbound investment by Chinese domestic entities through investment-related restrictions may be subject to such listing sanctions.
Article 25 empowers the competent State Council authorities to impose comprehensive countermeasures covering import and export activities, inbound investments, commercial transactions, cooperation, and entry and residence administration. Such countermeasures apply where foreign entities or individuals undermine China’s national sovereignty, security or development interests, disrupt normal market transactions with Chinese investors, or impose discriminatory treatment on Chinese outbound investors. This clause targets scenarios where foreign enterprises (including their Chinese subsidiaries) refuse normal investment-related transactions or restrict lawful Chinese outbound investment activities in compliance with overseas export control and unilateral sanction regimes.
These investigative and countermeasure mechanisms align with the Regulation of the State Council on Industrial and Supply Chain Security issued in April 2026 (Supply Chain Regulation), reflecting China’s strengthened multi-dimensional countervailing institutional framework covering industrial chains and outbound investment. Unlike the Supply Chain Regulation, the New Regulation does not specify key restricted sectors, which may be attributable to the existing sectoral classification system embedded in the current outbound investment approval and filing protocols.
(VII) Cross-Border Data Transfer
Corporate outbound investments frequently involve cross-border data flow, such as transferring domestically collected or generated data overseas for algorithm training or sharing operational experience and technical data with offshore branches and cooperative partners. The New Regulation reiterates and reinforces the statutory cross-border data compliance obligations for investing entities. Enterprises must assess whether the involved data contains personal information or important data that triggers mandatory cross-border compliance procedures and obtain official approval when sharing domestic data with foreign judicial or law enforcement authorities.
Article 14 clarifies that cross-border data flow arising from outbound investment shall be governed by national laws, administrative regulations and institutional provisions.
In accordance with the Cybersecurity Law, Data Security Law and Personal Information Protection Law, the cross-border transmission of personal information and important data must satisfy mandatory compliance prerequisites, including security assessments, standard contract filings, personal information protection certifications and valid individual consent. Personal information covers data related to Chinese consumers, employees and partner contacts. Important data is defined on a sector-specific and scenario-specific basis. For example, if an enterprise invests and builds factories overseas and needs to transmit sensitive data abroad in the process, (where such data involves core sector competitiveness, key technologies and processes for the industrial ecological development of key products, and data collected and generated during the research, design, production and manufacturing of major domestic equipment), they shall assess whether the data constitutes important data and fulfill the compliance obligations for cross-border data transmission.
Article 22 regulates responses to overseas judicial and law enforcement requests for domestic personal information and data. Chinese domestic entities and individuals participating in outbound investment-related arbitration, litigation or regulatory investigations overseas must comply with national confidentiality, data security, personal information protection, technology export control and judicial assistance regulations when submitting offshore evidence and materials. All legally required official approvals must be completed prior to disclosure.
Per the Data Security Law and Personal Information Protection Law, any provision of domestically stored personal information and data to foreign judicial or law enforcement bodies requires prior competent authority approval and full compliance with the technology export administration and regulatory requirements.
(VIII) Cross-Border Equity Investment and Financing Structure Establishment and Domestic and Overseas Capital Market Operations
The current outbound investment rules apply exclusively to domestic corporate and institutional investors, without establishing compliant channels for direct outbound investment by Chinese resident individuals. The New Regulation expands the statutory definition of investors to include domestic enterprises, other institutional organizations and Chinese resident individuals. This revision has far-reaching implications for cross-border equity investment and financing structuring, as well as the domestic and overseas listing arrangements for Chinese enterprises.
(a) The New Regulation will reshape cross-border equity investment and financing structuring practices. Previously, individual investors seeking outbound exposure typically completed investment filings through newly established domestic corporate or partnership entities or utilized qualified offshore investment schemes such as QDLP. These approaches were subject to stringent supervision, high tax costs and mandatory profit repatriation requirements.
As an alternative solution in practice, the derivative path after completing foreign exchange registration (in accordance with the Circular of the State Administration of Foreign Exchange on Foreign Exchange Administration of Domestic Residents’ Overseas Investment and Financing and Round-trip Investment via Special Purpose Companies (Hui Fa [2014] No. 37, hereinafter referred to as the SAFE Circular 37) issued in 2014) has become a common option for overseas investment by domestic individual residents. Specifically, SAFE Circular 37 addresses the needs of domestic natural persons to set up offshore special purpose companies for financing and conducting round-trip investment by utilizing their domestic corporate assets or equity interests, yet it does not resolve the issue of outbound capital remittance after foreign exchange registration. As a derivative practice, after completing the construction of an offshore red-chip structure through the SAFE Circular 37 pathway, Chinese natural persons may further pool funds via the first-tier offshore entities under their direct control (such as BVI companies). Such fund sources include the capital accumulated through multi-tiered dividend distributions from domestic enterprises to BVI entities, the proceeds from the sale of equity interests in lower-tier offshore entities (such as Cayman companies), and the revenue generated from offshore business operations. Although such practices may be deemed non-compliant in essence with the regulatory requirements of SAFE Circular 37, they have been widely adopted in practical operations.
The New Regulation clarifies that ‘investors’ cover domestic resident individuals and stipulates that the specific administrative measures governing outbound investment by domestic resident individuals shall be formulated by the investment regulatory authority and the commerce authority of the State Council. This expands the regulatory scope of domestic resident individuals’ direct overseas equity holdings from the previous foreign exchange registration dimension to the oversight of the National Development and Reform Commission (NDRC) and commerce authorities. Accordingly, the traditional outbound investment path implemented via the SAFE Circular 37 framework may undergo major changes. Given that the NDRC and commerce authorities have not yet issued supporting rules and registration guidelines governing individual outbound investment, the registration requirements for individual outbound investment with the NDRC and the commerce authorities remain to be further clarified and observed.
(b) Failure to complete compliance procedures for offshore shareholdings will significantly affect enterprises’ domestic and overseas listing arrangements. In past listing cases, many enterprises failed to complete the approval and filing procedures for their outbound investments, while red-chip structure enterprises had domestic resident individual shareholders that did not complete the registration under SAFE Circular 37. For a long time, the regulation of outbound investment and Circular 37 registration was governed by departmental rules rather than administrative regulations, and competent authorities at the ministerial level had no legislative power to impose penalties. Therefore, even with such compliance deficiencies, applying enterprises could relatively easily obtain confirmation that such issues ‘did not constitute major illegal acts’, or merely disclose the relevant compliance defects for overseas listing purposes, which would not substantially hinder their listing applications. Following the promulgation of the New Regulation, such regulation has been elevated to the level of administrative regulations. Enterprises and domestic resident individuals that fail to comply with the provisions will face a substantially higher risk of penalties. Meanwhile, securities regulatory authorities may require applying enterprises to obtain rigorous compliance confirmation in advance for such potential illegal issues; otherwise, their listing applications may not pass regulatory review. This will undoubtedly increase the difficulty of listing applications and further strengthen enterprises’ awareness of compliance.
(IX) Significant Strengthening of Legal Liability
1. Upgrade of Administrative Penalties
The disciplinary system under the existing departmental rules governing outbound investment is generally lenient, with punitive measures limited to non-property regulatory means such as orders for rectification, warnings and the revocation of approvals or filings, and no quantified penalty mechanism has been established. In practice, the core constraint of outbound investment filing under the existing rules lies in the inability to process cross-border capital remittance without completing the approval or filing procedures, which blocks the outbound flow of project funds. The New Regulation comprehensively upgrades the legal liability system by adding rigid disciplinary measures including tiered fines, entity accountability, and full-scale outbound investment prohibition, upgrading procedural restrictions to substantive penalties and substantially increasing the cost of violations. The overall liability penalty framework of the New Regulation benchmarks the mature disciplinary mechanisms of foreign-related regulatory laws including the Anti-Monopoly Law, Export Control Law and Anti-Foreign Sanctions Law. It inherits conventional penalty mechanisms covering property punishment, qualification punishment and individual accountability, and further improves such mechanisms tailored to the supervisory scenarios of outbound investment. Please refer to Annex 1 for a detailed comparison of the penalty provisions under the New Regulation.
2. Enhanced Criminal Liability as a Catch-All Regulation
The New Regulation is consistent with the protection of national security in the previous laws and regulations such as the National Security Law, Law on Guarding State Secrets, Counter-Espionage Law, Anti-Monopoly Law, Regulation on Countering Foreign Extraterritorial Jurisdiction Inappropriately and Anti-Foreign Sanctions Law. On the basis that most of the aforementioned laws and regulations stipulate criminal liability, it also provides for criminal liability clauses in a ‘catch-all’ manner:
(1) A ‘catch-all’ accountability for violations (or illegal acts) by investors (enterprises or individuals)
The New Regulation sets a catch-all accountability for violations (or illegal acts) by investors (enterprises or individuals). That is, if an outbound investor commits an act in the process of outbound investment that violates the relevant provisions of the Criminal Law of the People’s Republic of China (hereinafter referred to as the ‘Criminal Law’), such as acts that may harm national security (e.g., involving state secrets, intelligence or espionage activities), money laundering, illegal business operations, or covering up or concealing the criminal gains and proceeds from a crime, and if the criteria for criminal prosecution are met, the act will not only be a violation of the administrative regulations or civil infringement, but also bear criminal liability.
(2) Job accountability for public officials
The New Regulation also sets job accountability for public officials. If supervisors commit dereliction of duty, bribery or disclose secrets in the approval and supervision process, they may be guilty of crimes such as abuse of power, dereliction of duty, bribery, and intentional (or negligent) disclosure of state secrets. If investors are accomplices (e.g., the joint disclosure of state secrets) or concurrent offenders (e.g., bribery), they will also be held accountable when the criteria for criminal prosecution are met.
III. Conclusion
The current global geopolitical environment is becoming increasingly complex. Some countries have issued retroactive investment regulatory rules, restricting the development of Chinese-funded enterprises through unilateral sanctions, discriminatory reviews and other means. The existing overseas assets of Chinese funds face various external risks such as forced divestment and compliance retroactivity, and the uncertainty of enterprises’ outbound investment has increased significantly. The promulgation of the New Regulation optimizes the regulatory status of China’s outbound investment (characterized by decentralized supervision by multiple departments, lenient penalties and weak compliance constraints for a long time), and makes up for the institutional shortcomings of China’s outbound investment countermeasures and rights protection. It will be an important legal tool to respond to unreasonable overseas restrictions and hedge unilateral sanctions.
The New Regulation connects with the relevant institutional system of the Anti-Foreign Sanctions Law, clarifying that investigations can be carried out and corresponding countermeasures can be taken in accordance with the law against overseas discriminatory investment restrictions and the unreasonable infringement of rights and interests, protecting Chinese-funded overseas assets and business rights and interests. Domestically, the New Regulation unifies regulatory standards at the administrative regulation level, improves the legal liability system, and builds a richer compliance governance framework through diversified disciplinary methods such as graded fines, subject and individual accountability, investment prohibition and asset disposal. While supporting enterprises to steadily carry out outbound investment and safeguarding opening-up and development patterns, it further consolidates the bottom line of national security and asset security compliance in cross-border investments.
Enterprises need to take the initiative to update their compliance concepts. Domestic supervision requires not only attention to the outbound investment approval/filing requirements, but also to the comprehensive compliance requirements such as export control licenses, cross-border data transfers, national security, cross-border employmentAnnex 1 Detailed Comparison of Penalties Under the New Regulation
For further information, please contact:
DONG, Xiao (Marissa), Partner, JunHe
dongx@junhe.com
