On June 1, 2026, China’s State Council issued the Regulation on Outbound Investment (the “Regulation”), which will take effect on July 1, 2026. This is China’s first State Council administrative regulation dedicated specifically to outbound investment. This article provides a brief overview of the Regulation’s key provisions and their practical implications for companies and individuals.
1. Regulatory Framework: Higher-Level and More Integrated
Before the Regulation, China’s outbound investment regime was mainly based on separate rules administered by the National Development and Reform Commission (“NDRC”), the Ministry of Commerce (“MOFCOM”) and the State Administration of Foreign Exchange (“SAFE”), covering project approvals and filings, overseas investment filings and certificate administration, foreign exchange registration, and outbound remittances. The Regulation does not replace these existing rules. Rather, as a State Council administrative regulation—which ranks above rules issued by central government ministries and commissions in China’s legal hierarchy—it provides a higher-level framework for the existing regime. The Regulation also authorizes the NDRC and MOFCOM, together with other relevant authorities, to identify encouraged, restricted, and prohibited outbound investments. The scope and implementation of these categories will depend on subsequent policies and implementing measures.
More importantly, the Regulation connects outbound investment approval and filing requirements with other regulatory regimes. Previously, the relevant regimes applied alongside one another, but no single higher-level instrument expressly coordinated their application. The Regulation clarifies that where outbound investment involves foreign exchange, imports and exports, cross-border services, data flows, personnel mobility, merger control, export control, cybersecurity, tax, or state-owned asset supervision, the applicable PRC laws and regulations continue to apply. Outbound investment compliance therefore needs to be assessed within a broader PRC regulatory framework, rather than solely through the NDRC, MOFCOM, and SAFE regulatory processes.
2. Scope of Coverage: Broader Reach and Greater Focus on Substance
Under the previous framework, outbound investment regulation primarily focused on PRC enterprises and other organizations establishing overseas entities or acquiring interests in overseas enterprises or projects, together with the related approval, filing, foreign exchange registration and fund remittance procedures. The Regulation adopts a broader definition of outbound investment. It covers activities through which PRC investors directly or indirectly obtain ownership, control, management rights or other related interests in overseas enterprises or assets, whether through contributions of assets or other interests or through the provision of financing or guarantees.
The Regulation also expands the scope of regulated investors. In addition to PRC enterprises and other organizations, it expressly includes resident individuals. This change may be particularly relevant to founder-led offshore structures and employee shareholding arrangements. However, the Regulation does not establish a generally available outbound investment channel for resident individuals, and its practical effect will depend on implementing rules that have yet to be issued.
The Regulation’s express references to “indirect investment” and the “provision of financing or guarantees” merit particular attention. In structures involving offshore SPVs, funds, trusts, or holding companies, transactions may occur entirely offshore while the underlying assets, technologies, data, ownership structure, or control arrangements remain connected to China. Similarly, financing, guarantees, or other credit support provided by a PRC entity may fall within the regulatory framework where such support enables the entity or its affiliates to obtain interests in overseas enterprises or assets. Regulatory scrutiny may therefore look beyond the immediate transaction parties, place of incorporation and transaction form, and focus instead on beneficial ownership, changes in control, funding arrangements and the underlying assets or technologies.
3. Export Control and Data Compliance: Technology, Services and Data Transfers
The Regulation does not create a new export control regime. Existing outbound investment rules already addressed certain prohibited or restricted exports. Building on those rules, the Regulation articulates these restrictions more comprehensively by expressly covering goods, technologies, services, and related data, as well as non-traditional methods of cross-border transfer. Specifically, the Regulation provides that investors conducting outbound investment activities may not export or use goods, technologies, services, or related data that are prohibited from export under PRC law, and may not export or use restricted goods, technologies, services, or related data without obtaining the required authorization.
These restrictions extend beyond conventional exports of goods and formal technology licensing arrangements. They also apply where relevant goods, technologies, services, or data are transferred through the cross-border deployment of technical personnel, overseas work assignments, cross-border technical guidance or cross-border personnel training. Accordingly, in arrangements involving overseas manufacturing, technology licensing, overseas R&D, software deployment, or data sharing, companies should assess not only whether the required outbound investment approval or filing procedures have been completed, but also whether export control, technology export licensing, cross-border data transfer or personal information protection requirements apply.
4. Security Review: Investment, Transfers and Asset Disposals
The Regulation establishes an outbound investment security review system. The NDRC and MOFCOM, together with other relevant authorities, are authorized to review outbound investment, as well as transfers or disposals of related assets and interests, where such activities affect or may affect national security. Relevant organizations and individuals must assist and cooperate with the review and comply with the review decision.
This system applies not only to new investment projects. By expressly covering transfers and disposals of related assets and interests, the Regulation indicates that post-investment asset sales, equity transfers, offshore restructurings, exits, and changes of control may also fall within the scope of security review. For transactions involving sensitive technologies, important data, strategic resources, or critical assets, the offshore location of the transaction or target company may not, by itself, exclude PRC security review or related compliance requirements. The Regulation has yet to specify whether or when a filing is required, or set out detailed review procedures, timelines, substantive criteria, or potential conditions or other mitigation measures. These matters remain to be clarified through implementing rules and regulatory practice.
5. Legal Liability: Stronger Penalties and Individual Liability
The Regulation establishes a more explicit and stringent penalty framework. Depending on the violation, authorities may revoke approvals or filing documents, confiscate illegal gains, impose fines—including, in specified cases, fines of up to 1% of the investment amount—order the investment to cease or require the disposal of shares or assets within a specified period, refuse to accept approval or filing applications for up to three years, or prohibit the violator from conducting outbound investment for one to three years. For certain violations, directly responsible managers and personnel may also face personal fines of up to RMB 100,000.
6. Practical Implications
The Regulation should not be read as imposing a general prohibition or broad restriction on outbound investment by PRC investors. Rather, it heightens compliance requirements for transactions involving sensitive assets, national security concerns, or opaque funding arrangements. Multinational companies should therefore conduct comprehensive PRC regulatory assessments early in the transaction process, rather than assume that offshore structures will insulate a transaction from regulatory scrutiny, and should allocate the relevant risks through closing conditions, indemnities, and post-closing contractual arrangements. Because non-compliance by PRC investors may create both deal-execution and longer-term post-closing risks, early risk identification and clear contractual allocation will be important to transaction certainty.
*Jiarui Cheng is an intern in the firm's Shanghai office.