China issues foreign exchange draft rules to optimise cross-border investment and financing

On 18 June 2025, China’s State Administration of Foreign Exchange (SAFE) released the Notice of the State Administration of Foreign Exchange on Deepening the Reform of Foreign Exchange Administration for Cross-border Investment and Financing (Draft for Comments), to expand cross-border investment and financing, particularly for foreign direct investment (FDI).

The Draft, now open for public comments until 18 July 2025, covers three major areas: cross-border investment, cross-border financing and the facilitation of capital account income and payment. The following article sets out the principal implications of the Draft on foreign invested enterprises (FIE).

1. Key reforms for FIE

1. Reforms in cross border investment
   • Eliminating the registration of basic information on pre-establishment expenses for FDI
     Under the Draft, foreign investors who intend to set up a FIE in China are allowed to open pre-establishment expense accounts and remit funds directly without prior basic information registration.
      
   • Cancelling the registration of FIE domestic reinvestment
     The Draft eliminates the basic information registration requirement for the invested enterprise or the equity transferor who will receive the FIE’s domestic reinvestment funds, allowing them to open accounts and receive investment funds directly.
      
   • Permitting domestic reinvestment of profits in foreign currency under FDI
     The notice expressly allows FIEs to reinvest profits in foreign currency (excluding currency purchased through currency conversion) domestically, although practical implementation details remain unclear.
     
     Strategic view: These changes simplify capital flows at all stages of FDI — from initial entry to expansion.
      
2. Reforms in cross border financing 
   • Expanding cross-border financing facilitation
     The Draft proposes that qualified high-tech enterprises and qualified SMEs can borrow foreign debt within a quota not exceeding the equivalent of USD 10 million. Certain enterprises can borrow up to USD 20 million, greatly lifting barriers in accessing cross-border financing or securing adequate funding for such companies.  
     
     Strategic view: This policy favours capital-intensive startup FIEs in AI, semiconductors, and biopharma that heavily rely on R&D and struggle with financing. It allows more flexible fundraising.
3. Reforms in facilitation of capital account income and payment
   • Reducing the negative list for the use of capital proceeds
     The Draft lifts the restriction on using capital account proceeds to purchase real estate for non-self-use (except for real estate developers and leasing businesses).
     
     Strategic view: These changes may benefit FIEs needing expansion of commercial real estate. Other regulatory restrictions on FIEs to purchase real estate for non-self-use, however, may still apply.

2. Policy implications and reform trajectory

The policies proposed in the Draft are the implementation of the broader 2025 Action Plan for Stabilising Foreign Investment, released in February 2025, which set down 20 initiatives to enhance China’s investment climate, especially in the manufacturing and biomedicine sectors.

Most reforms in the Draft represent a national expansion of pilot programmes previously tested in designated areas. For example, the removal of the FIE domestic reinvestment registration has already undergone trials in select pilot zones.

Some pilot programmes in facilitating cross border investment and financing, however, such as foreign debt registration via local banks rather than local SAFE offices, are not yet included in this Draft. Nevertheless, given the consistent direction of policy, we believe such pilot programmes will be expanded nationwide in the near future.

3. Opportunities for foreign investors

The Draft offers meaningful signals about China’s continuing efforts to facilitate FDI by reducing procedural barriers and expanding eligible activities. Foreign investors should take these strategic opportunities by doing the following:

• Reassess strategies in newly accessible sectors (e.g., real estate);
• Monitor final rules for implementation clarity; and
• Monitor other sector-specific policies under the 2025 Action Plan for Stabilising Foreign Investment.

For more information on the Draft and how it could affect your business, contact your CMS client partner or these CMS experts: