China’s Restricted ODI Investments

China’s Outbound Direct Investment (ODI) regime does not only classify projects as “encouraged” or “prohibited.” A significant middle category exists: Restricted Investments.

These projects are not automatically banned—but they are subject to heightened scrutiny and approval requirements, particularly by the:

1. National Development and Reform Commission (NDRC)
2. Ministry of Commerce of the People's Republic of China (MOFCOM)

A key feature in many restricted scenarios is whether domestic assets, onshore financing, or guarantees are involved. Projects fully funded overseas may fall outside certain restrictions.

I. Restricted ODI Categories (Subject to Approval)

The following investments require approval by the competent overseas investment authority:

1️⃣ Sensitive Countries

Investments in:

1. Countries with no diplomatic relations with China
2. Countries affected by war or instability
3. Jurisdictions restricted under bilateral or multilateral treaties

2️⃣ Real Estate & Speculative Sectors

Investments in:

1. Real estate development
2. Hotels
3. Film studios
4. Entertainment
5. Sports clubs

These sectors were targeted following concerns about capital outflows and speculative overseas acquisitions.

3️⃣ Offshore Equity Investment Funds (Without Industrial Projects)

The establishment of offshore equity funds lacking a specific underlying industrial project is restricted.

4️⃣ Technical & Environmental Non-Compliance

Investments involving:

1. Outdated production equipment not meeting destination standards
2. Failure to comply with environmental or energy regulations

are subject to restriction.

II. Real Estate Investments Excluded from Restriction

Certain real estate-related activities are not treated as restricted, including:

• Property management and real estate agency services

• Properties acquired for self-use (offices, dormitories)

• Industrial parks, technology parks, logistics infrastructure

• Minority stakes acquired by construction firms to secure contracts

• Approved or filed uncompleted projects

• Projects fully funded overseas without domestic assets or guarantees

III. Hotel Investments Excluded from Restriction

The following are excluded from restriction:

• Hotel management businesses (without property ownership)

• Restaurants without lodging services

• Approved or filed uncompleted projects

• Projects fully funded overseas, with no domestic asset involvement

IV. Offshore Equity Funds Excluded from Restriction

Funds or platforms may avoid restriction where:

• No domestic assets are involved

• No onshore financing or guarantees are provided

• All capital is raised overseas

Additionally:

• Funds established by domestic financial institutions with prior regulatory approval...