Breaking! Effective July 1 – In-depth Interpretation of the State Council's New Overseas Investment Regulations | Series III: After the New Regulations, Which Key Issues Remain Unresolved?
The Regulations of the State Council on Outbound Investment(State Council Order No. 837, hereinafter "Order No. 837"), officially announced on June 1, 2026, represents a landmark piece of top-level legislation in the history of China's outbound investment regulation. For the first time, it unifies the regulatory framework in the form of an administrative regulation, clarifies security review mechanisms, and strengthens legal liabilities, ending the long-standing situation of fragmented rules and inconsistent standards.
With less than a month remaining until its official implementation on July 1, several critical issues of greatest concern to the market and most impactful on deal execution remain unresolved, pending further supplementary implementing rules.
Outbound Investment by Resident Individuals: First Inclusion in Law, But Filing Authorities, Procedures, and Legacy Asset Handling Are Entirely Blank
Article 2 of Order No. 837 explicitly includes resident individuals within the definition of investors at the administrative regulation level for the first time. This is a historic breakthrough, completely filling the long-standing legal vacuum regarding the legal basis for individual overseas investments.
Simultaneously, Article 33(3) stipulates: Specific management measures for outbound investment by resident individuals within China shall be formulated by the competent investment department and the competent commerce department of the State Council.
This means: While the legislature has confirmed that individual investments require specific rules, how to file, where to file, and what to file remain entirely blank.
Three Core Practical Confusions:
No Filing Entry Point: Current filing systems of the NDRC and MOFCOM are designed for enterprises, supporting only corporate account logins. MOFCOM only issues Enterprise Overseas Investment Certificates. There is no application channel for individuals. Individuals cannot directly complete ODI approval/filing procedures.
Unclear Boundary with SAFE Circular 37 Registration:
SAFE Circular 37 registration is a foreign exchange registration, not the "NDRC + MOFCOM approval/filing" referred to in Order No. 837.
Circular 37 only applies to limited scenarios: offshore financing by domestic enterprises, equity incentives in unlisted overseas companies, etc.
For direct individual investments in overseas real estate, physical assets, financial products, family trusts, etc., there is currently no compliant filing path.
No Transitional Arrangements for Legacy Individual Projects: For existing personal overseas SPVs that have completed foreign exchange registration under Circular 37, is retroactive ODI approval/filing required after July 1? Under what standards and within what timeframe? The new regulations provide no grandfathering clause or transitional arrangement, leaving legacy projects facing high uncertainty.
Unclear Rules for Mixed Red-Chip Structures: Red-chip structures commonly involve co-shareholding by "individual shareholders + domestic legal entity shareholders." Does the same SPV require a dual process of corporate ODI plus individual filing? Who leads, and how to consolidate the application? No answers exist yet.
Our Predictions and Practical Suggestions:
Individuals setting up red-chip structures: Complete SAFE Circular 37 foreign exchange registration as soon as possible before July 1 to lock in key milestones.
Individuals planning new overseas investments: Postpone initiation and wait for the NDRC and MOFCOM to issue special management measures for individuals.
Existing individual structures: Proactively organize funding sources and structural layers in preparation for potential retroactive filing requirements.
Overseas Reinvestment: Urgent Need to Unify the Boundary Between "Post-event Reporting" and "New ODI Approval"
Article 33(2) of Order No. 837 states: Reinvestment abroad using assets, rights, and interests obtained from outbound investments shall be carried out in accordance with these Regulations and other relevant state provisions.
However, "how to implement" this faces apparent conflicts in current rules.
Inconsistencies in Current Rules:
MOFCOM Order No. 3: Post-event reporting is sufficient.
NDRC Order No. 11: Large-scale or sensitive industry reinvestment may require prior approval/reporting, treated similarly to a new ODI project.
SAFE Document No. 13: Has already abolished foreign exchange filing for overseas reinvestment.
Three Major Pain Points in Practice:
Ambiguous Judgement Criteria: What amount threshold, industry sensitivity, or involvement of domestic financing would upgrade a reinvestment from "post-event reporting" to "new ODI approval"? No quantitative standards exist. Cases have occurred where a company used overseas profits to invest in an AI R&D center, completed post-event reporting with MOFCOM, but was then required by the NDRC to undergo new approval/filing, delaying the project for months.
Insufficient Enforcement of Reinvestment Reporting Obligations: Current penalties for "failure to report reinvestment" are far weaker than those for failing to complete ODI. Non-reporting and omissions are common. The new regulations do not explicitly strengthen this.
No Guidance on Multi-tier Reinvestment: For layered reinvestment (e.g., Hong Kong → Singapore → Vietnam → Cambodia), must reporting be done at every tier? Operational standards are chaotic.
Our Suggestions:
Full-coverage post-event reporting: Report all reinvestments, regardless of amount or industry, in the MOFCOM system to maintain a complete compliance record.
Proactive pre-communication for large/sensitive reinvestments: For reinvestments involving large sums, high-tech, or sensitive countries/regions, proactively communicate with local NDRC and MOFCOM offices beforehand to avoid being deemed as having failed to obtain approval/filing.
Establish internal reinvestment ledgers: Record the source of funds, tiers, and purpose for each transaction to ensure traceability.
Applicability Boundary for Existing Projects: "Old Rules for Old Projects" or Full Retroactivity?
Order No. 837 sets no transition period, grandfathering clause, or amnesty provisions. This is the biggest risk point for existing projects.
Three Key Practical Questions:
How to Apply to Projects with Approved but Not Fully Disbursed Funds? For projects that obtained ODI approval years ago but haven't had all capital remitted overseas, how will continued remittances after July 1 be reviewed – under old or new rules? Will the new requirements on technology, data, and personnel be mandatorily applied?
Does Retroactivity Apply to Ongoing Obligations? For overseas factories or R&D centers operating for years with continuous personnel dispatches, technology transfers, and data transmission, will they need to retroactively conduct export control assessments, data cross-border transfer assessments, and security reviews after July 1? The new regulations are silent.
Stronger Linkage with Annual ODI Equity Registration: The annual ODI equity registration (deadline June 30) directly impacts foreign exchange business processing. After the new regulations take effect, if this registration becomes linked to security review and technology/data/personnel compliance, non-compliance could lead to controls affecting profit repatriation and fund transfers.
Our Suggestions:
Immediately launch a comprehensive self-audit of existing projects:
Check consistency between approved filing information and actual overseas operations.
Assess involvement in technology exports, cross-border data transfers, and core personnel dispatches.
Verify completeness of historical annual equity registrations.
If gaps are found: Proactively complete amendment filings, supplementary reports, or compliance rectifications before July 1.
For projects with approved but undisbursed funds: Quickly organize fund plans and communicate in advance with foreign exchange and regulatory authorities regarding the applicable standards.
Outbound Investment Security Review: Trigger Conditions, Process, and Remedies Entirely Unclear
Article 15 of Order No. 837 formally establishes an outbound investment security review system for investments that affect or may affect national security, including the transfer or disposal of related assets and rights.
However, how the review is initiated, who conducts it, how long it takes, and whether the outcome can be appealed are all blank.
The latest signal for reference: On April 27, 2026, the NDRC's Foreign Capital Security Review Office publicly blocked a cross-border M&A deal in the AI field for the first time, citing reasons of technology control transfer, cross-border data flow, and national security risks.
Three Core Practical Confusions:
Trigger List Not Defined: What scenarios definitely trigger a review? Sensitive industries (AI/semiconductors/military/data), sensitive destinations (sanctioned countries), transfer of control, shareholding ratios, investment size? No negative list or positive guidance exists.
Review Process Uncertain: The acceptance window, application materials, review timeline, whether transactions are suspended during review, and whether a written decision is issued are all unspecified. Investors cannot incorporate the review into their transaction timelines, creating significant uncertainty for M&A closings.
Remedy Channels Unclear: When a review decision results in "prohibition of investment" or "order to dispose of assets," can the affected party apply for administrative reconsideration or file an administrative lawsuit? Or is the decision final and incontestable? The legal text is unclear.
Our Predictions and Practical Suggestions:
Await further detailed implementing rules.
Write "clearance of China's outbound investment security review" into the conditions precedent for closing.
Do not rely on luck. Security review decisions are compulsory. Proactive pre-screening is cheaper than post-hoc remediation.
Validity Relationship Between Order No. 837 and Orders No. 3 & No. 11: What Remains and What Is Abolished?
According to the Legislation Law, the validity of administrative regulations is higher than that of departmental rules. Conflicts shall be resolved in favor of Order No. 837. However, practical problems remain acute:
Does the 2-year validity period for the Enterprise Overseas Investment Certificateunder Order No. 3 remain effective?
Are the sensitive project approval standards and large-scale project reporting standards under Order No. 11 still applicable?
Will the application systems, forms, and material checklists be updated?
Until supporting detailed rules are issued, enterprises cannot determine the application path.
Our Suggestions:
Adopt a "higher standard" principle: Follow the procedural steps of the old rules but prepare materials according to the new rules, proactively supplementing technology, data, and personnel security assessments.
Closely monitor updates on the NDRC and MOFCOM websites for system upgrades and changes to service guidelines.
For complex projects, proactively communicate with local regulatory windows to confirm the latest accepted standards.
Final Summary: The Last 30-Day Window – Three Things Investors Must Do Now
With less than a month until Order No. 837 takes effect on July 1, we are in a critical "window period" where the new rules are published, detailed rules are pending, and old rules still apply.
Our core recommendation is clear: Do not passively wait; instead, proactively anticipate and prepare in advance.
Low-sensitivity, non-controversial projects: Try to complete ODI filing and obtain the certificate before July 1 to lock in the old procedures and reduce uncertainty.
Comprehensive self-audit of existing projects: Focus on checking filing consistency, technology/data/personnel compliance, and annual equity registration status. Rectify any identified issues immediately.
Sensitive industry / large-scale / individual investments: Temporarily hold off on pushing forward. Wait for supporting detailed rules while simultaneously building a compliance contingency plan.
As a professional cross-border investment advisory firm, we will continue to monitor ministerial supporting documents, regulatory interpretations, and system updates, providing you with end-to-end implementation solutions for ODI approval/filing, legacy project rectification, security review, and red-chip structuring. For specific projects, please consult with Zhongfu Borui's professional advisors based on your actual circumstances.
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