China’s Outbound Investment Rules

China’s Outbound Direct Investment (ODI) regime has evolved from strict pre-approval controls to a more structured, risk-based regulatory system. In this episode, we explain how ODI works today, the role of key regulators, and what Chinese enterprises must consider before investing abroad.

ODI operates within the broader policy context of China’s “Going Global” Strategy and the Belt and Road Initiative (BRI).

🔎 The Evolution of the ODI Framework1️⃣ 2004 – Approval-Based System

China initially introduced ODI regulations under a strict approval regime, requiring government consent before overseas investment could proceed.

2️⃣ 2014 – Shift to Filing-Based System

In 2014, China moved toward a filing-based system:

• Most ordinary ODI projects require filing

• Only specific categories require formal approval

This reform streamlined outbound investment while preserving regulatory oversight.

3️⃣ 2018 – Sensitive Sector Refinement

The framework was further refined in 2018, introducing:

• Expanded definitions of sensitive sectors and countries

• A supervisory classification system:

1. Encouraged
2. Restricted
3. Prohibited

This created a more nuanced, policy-aligned control mechanism.

🏛️ The Three Core Regulatory Authorities

Any Chinese enterprise investing abroad must navigate three key authorities:

1️⃣ National Development and Reform Commission (NDRC)

The NDRC procedure depends on:

• Investment amount

• Whether the investment is direct or indirect

• Whether the sector is classified as sensitive

Key thresholds include:

• Investments exceeding USD 300 million require submission of a formal project report

• Non-sensitive direct investments generally require an application

• Non-sensitive indirect investments may not require filing

• Sensitive sector projects require approval regardless of size

2️⃣ Ministry of Commerce of the People's Republic of China (MOFCOM)

MOFCOM applies a similar dual-track system:

• Filing for ordinary projects

• Approval for sensitive sectors or jurisdictions

MOFCOM focuses primarily on commercial compliance and outbound investment policy alignment.

3️⃣ State Administration of Foreign Exchange (SAFE)

After NDRC and MOFCOM steps are completed:

• The project must be registered with a SAFE-authorised foreign exchange bank

• Required documents include the foreign exchange application form and the company’s business licence (with unified social credit number)

SAFE oversees capital outflows and foreign exchange compliance.

⚖️ Practical Considerations

Chinese enterprises must assess:

• Sector classification (Encouraged / Restricted / Prohibited)

• Sensitivity of destination jurisdiction

• Investment structure (direct vs indirect)

• Capital outflow compliance

• Documentation consistency across regulators

Failure at any stage can delay or block outbound investment.

🎯 Key Takeaway

China’s ODI regime is no longer purely restrictive—it is structured and policy-driven.

The system balances:

• Encouragement of strategic overseas expansion

• Capital control safeguards

• Sector-based risk management

For Chinese enterprises and foreign partners,...