China issues new regulation governing outbound investment activities

On 1 June 2026, the Chinese government announced the Regulation on Outbound Investment, China's first comprehensive administrative regulation governing outbound investment activities. While the Regulation does not alter the existing outbound direct investment (ODI) approval and filing framework, it consolidates requirements into a high-level regulation and reveals the direction of China's outbound investment policy.

The Regulation signals China's evolving approach to outbound investment from a framework based on filings and foreign exchange control to one emphasising national security, export controls and ongoing compliance management.

Key takeaways

• National security review now becomes an independent regime in China's outbound investment framework.
• Outbound investment and export control compliance are becoming increasingly interconnected.
• Regulatory expectations extend beyond obtaining ODI approvals and filings and increasingly focus on the ongoing operation and management of overseas investments.
• Businesses should assess not only whether an investment can proceed, but also whether it could involve the transfer of sensitive technologies, data or know-how outside China.
• The regulatory scope has been expanded: outbound investment by individual residents has been incorporated into the regulatory framework, and detailed regulatory rules are expected to be issued.

National security review now a significant regime

One of the most notable features of the Regulation is the formal incorporation of a national security review mechanism for outbound investments. Although national security concerns have influenced outbound investment regulation in practice for some time, previous ODI rules focused on investment administration and capital controls.

According to the Regulation, outbound investments affecting national security may be subject to review. While an implementation guidance is expected, the provision reflects a broader regulatory trend in China whereby national security considerations are increasingly influencing cross-border commercial activities.

For businesses, this may result in greater scrutiny of investments involving advanced technologies, critical infrastructure, strategic resources, defence-related sectors or significant data assets.

Export controls and outbound investment are increasingly linked

The Regulation's expressly connects outbound investment with China's export control regime.

The Regulation prohibits investors from using outbound investment activities to transfer goods, technologies, services or related data whose export is prohibited or restricted under Chinese law. The concept of transfer extends beyond traditional exports, also encompassing dispatching technical personnel across borders, arranging for personnel to work in other countries or regions, providing technical guidance across borders, or arranging cross-border training of persons and other arrangements through which goods, technologies, services, or related data prohibited or restricted without authorisation are transferred to other countries.

This reflects growing regulatory concern that outbound investment may serve as a channel for transferring strategically important technologies, expertise or data outside China.

As a result, businesses operating in technology-intensive sectors should consider export control and technology transfer issues at an earlier stage of transaction planning, particularly overseas investments involving research and development activities, technical cooperation or post-closing integration measures.

ODI by individuals are incorporated into the regulatory framework

The Regulation indicates that investors include enterprises, other organisations and individual residents within China. Notably, individual residents are explicitly included within the scope of investment entities. The Regulation also stipulates specific administrative measures governing outbound investments by individual residents within China must be formulated by the relevant authorities.

Penalties are comprehensively enhanced

The Regulation strengthens the enforcement regime by establishing liabilities for various non-compliant outbound investment activities. These include refusing to cooperate with the national security review, engaging in prohibited investments, failing to complete the required approval or filing procedures and submitting false documentation. The prescribed consequences may involve the imposition of monetary penalties, orders to cease investment activities, mandatory disposal of equity interests or assets within a specified time frame, confiscation of illegal gains, prohibition of future approval, filing applications or undertaking outbound investments for one to three years.

Looking ahead

The Regulation does not represent a wholesale overhaul of China's ODI regime, but formalises regulatory trends that have emerged in recent years and provides a stronger legal basis for future supervision.

The key message: outbound investment compliance should not be viewed solely through the lens of ODI approvals and filings. National security, export control, data governance and ongoing compliance considerations may play an important role in the planning, execution and operation of overseas investments. Companies engaging in outbound investment activities should monitor further developments closely and ensure that these considerations are incorporated into their broader transaction and compliance strategies.

For more information on ODI regulations in China, contact your CMS client partner or the CMS experts who contributed to this article.