China tightens oversight of outbound investment with new regulation

Mucahithan Avcioglu

China has unveiled a new regulation governing outbound investment, granting authorities broader powers to scrutinize overseas deals, control sensitive transfers, and respond to foreign restrictions targeting Chinese investors.

The regulation, signed by Premier Li Qiang on May 5, will take effect July 1, according to a State Council statement carried Monday by state news agency Xinhua. It was approved at a State Council executive meeting on April 17.

The rules apply to outbound investments by entities and individuals within China, including companies, other organizations, and resident individuals.

Under the regulation, investors are prohibited from exporting, using, or transferring overseas any goods, technologies, services, or related data subject to export restrictions without authorization.

The rules also prohibit such transfers through cross-border personnel assignments, technical guidance, or training without official approval.

The regulation establishes a national security review mechanism for outbound investments and transfers of related assets or rights that affect or could affect national security.

Companies and individuals involved in such transactions will be required to cooperate with reviews and comply with official decisions.

The framework also outlines potential countermeasures against foreign entities or individuals that Beijing says undermine China’s sovereignty, security, or development interests, impose discriminatory restrictions on Chinese investors, or arbitrarily sever business ties with Chinese firms.

Possible measures include restrictions on China-related imports, exports, investments, transactions, and cooperation, as well as limits on entry, employment, stay, and residency rights for relevant personnel.

The new rules come as China moves to strengthen oversight of cross-border flows of capital, technology, and data while pushing back against increasing foreign scrutiny of Chinese companies and supply chains.