China Eases Restrictions on Outbound Investment

飞雪寒冰

The State Administration of Foreign Exchange said it will ease restrictions on the movement of investment funds overseas, reducing the cost of outbound investment and encouraging the pursuit of more foreign deals.

The new rules take effect on Aug 1, SAFE said on its Web site on July 15.

In response to the new regulations, "small and medium-sized enterprises are now preparing for overseas expansion and for mergers," said Li Xiaohui, a tax partner at Deloitte & Touche.

Before the new rules, such transactions were feasible only for the largest Chinese companies, Li added.

The liberalized rules require Chinese companies setting up overseas subsidiaries or buying foreign companies only to declare the sources of funds and register their remittance with SAFE. Previous procedures required prior approval.

The new rules will also permit companies to use their own foreign exchange deposits, apply for loans in foreign currencies or buy foreign exchange from Chinese banks to fund overseas investments.

The rules are subject to adjustment in the event of major disruptions arising from increased cross-border capital flows, SAFE said