Until 28 December 2024, foreign-invested enterprises in China were prohibited from using domestic RMB loans for reinvestment in China, including for equity investment in other companies. This restriction, introduced in the 2011 MOFCOM-SAFE Circular (Shang Zi Han [2011] No. 1078), was discriminatory as it applied only to FIEs. It was abolished by Announcement No. 63 (2024), aligning the treatment of FIEs with domestic enterprises for purposes of domestic loan usage.
"After research, it has been decided to abolish the "Notice of the Ministry of Commerce and the State Administration of Foreign Exchange on Further Improving the Management Measures for Foreign-Invested Companies" (Shangzi Han [2011] No. 1078), which is now announced. [...]" (Announcement No. 63 of 2024 of the Ministry of Commerce and the State Administration of Foreign Exchange to revoke the "Notice of the Ministry of Commerce and the State Administration of Foreign Exchange on Further Improving the Management Measures for Foreign-Invested Companies" [google translation])
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"To all provinces, autonomous regions, municipalities, cities specifically designated in the state plan , Xinjiang Production and Construction Corps., commerce departments of Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu and Xi'an, national economic and technological development zones and border economic cooperation zones; branch bureaus and foreign exchange administration departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions and municipalities, and SAFE branch bureaus of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo,
In order to regulate the approval procedures and foreign exchange management of foreign-funded investment companies, and promote the development of foreign-invested investment companies, relevant requirements are hereby notified as follows:
1. Commerce authorities at all levels should strengthen the administration of the approval of statistical information of foreign-funded investment companies. Approved foreign-funded investment companies should be noted as "Investment Company" in the Basic Information Sheet of Foreign-invested Enterprises, and registered in the system of administration of review and approval for foreign-invested enterprises of MOFCOM. Other types of enterprises are not allowed to name themselves as "Investment Company" or "Investment Holdings", or similar terms. These requirements will be regarded as important issues in the joint annual inspection of foreign-invested companies.
2. Domestic loan of foreign-funded investment companies shall not be used for reinvestment in China.
3. Foreign-funded investment companies may, with the approval of local foreign exchange bureau, directly use RMB profits, RMB obtained in China by way of early recovery of investment gains, liquidation, equity transfer and capital reduction for domestic investment. Foreign investors may also carry out domestic investment with the said legitimate income after register capital (investment increment) to investment companies. Foreign-funded investment companies shall provide the foreign exchange administration authorities with the following materials when applying for domestic investment approval:
(A) Written application;
(B) IC card for foreign exchange registration of foreign-funded companies
(C) Documents from commerce authorities approving domestic investment of foreign-funded investment companies
(D) Evidence of RMB funding sources and documents submitted for domestic reinvestment of profits, early recovery of investment gains, liquidation, equity transfer and capital reduction (increment) of legitimate RMB income of foreign-funded investment companies.
(E) The latest capital verification report and financial audit report (with the audit report of foreign exchange income and expenditure).
Foreign-funded investment companies may transfer RMB funds directly to the invested enterprises, or transfer to a foreign-funded investment company,before transferring to the invested enterprise after the materials are reviewed and approved by the local foreign exchange bureau." (Notice of the Ministry of Commerce and the State Administration of Foreign Exchange on Further Improving the Management Measures for Foreign-Invested Companies" (Shangzi Han [2011] No. 1078) [google translation])
Announcement No. 63 of 2024 of the Ministry of Commerce and the State Administration of Foreign Exchange to revoke the "Notice of the Ministry of Commerce and the State Administration of Foreign Exchange on Further Improving the Management Measures for Foreign-Invested Companies"
Notice of the Ministry of Commerce and the State Administration of Foreign Exchange on Further Improving the Management Measures for Foreign-Invested Companies" (Shangzi Han [2011] No. 1078)
[<a href="https://wzs.mofcom.gov.cn/zcfb/art/2025/art_dc0f764e93864dd08aff397b2b8c4838.html">Announcement</a>],[<a href="https://www.bj-51.com/english/article/policyrelease/aaa/201202/20120207955891/">Notice</a>]