China’s New Overseas Investment Rules: Can Your Chinese Investor Actually Get the Money Out?

A Chinese investor agrees to put $10 million into your company. You negotiate valuation, board rights, closing mechanics, and exit provisions. Everyone signs. You start hiring against the money. Then closing approaches and the funds do not arrive.

The Chinese investor may still want the deal and may have the money. The problem is that it cannot get the money out of China. Any company raising capital from a Chinese investor needs to understand China’s outbound direct investment regime before signing. Outward Direct Investment (ODI) is often treated as the Chinese investor’s paperwork problem. It is the foreign company’s closing risk. That has always been true. China’s new outbound investment regulation makes it harder to ignore.

China's New ODI Regulation Raises the Stakes

On May 5, 2026, Chinese Premier Li Qiang signed State Council Order No. 837, promulgating the Provisions of the State Council on Outbound Investment. The regulation was published on June 1 and took effect on July 1. It is China’s first administrative regulation devoted to outbound investment. Until now, the field was governed primarily by departmental rules from the National Development and Reform Commission (NDRC), Ministry of Commerce (MOFCOM), and State Administration of Foreign Exchange (SAFE), each running its own lane. Order No. 837 pulls those rules into a single framework at a materially higher level of legal authority. Regulators now have a firmer basis for coordinating their work and punishing violations.

Order No. 837 applies to enterprises, other organizations, and resident individuals. For the first time, China’s general administrative regulation on outbound investment expressly includes resident individuals within its definition of investors. Individuals were already subject to Chinese foreign-exchange restrictions, and some used SAFE’s Circular 37 registration process for offshore special-purpose vehicles, but China had no general ODI pathway for direct individual investment. This matters most in smaller transactions, where the money often comes from a person rather than a company and neither the investor nor its advisers may understand what the new rule requires.

The security overlay is broader. The regulation calls for classified and tiered supervision throughout the life of an investment, requires investors to complete the applicable approval or filing, information-reporting, and cross-border funds-registration procedures, and establishes a national security review system for outbound investments and related transfers of assets and interests that affect or may affect China’s national security. It also ties outbound investment expressly to China’s export controls, cross-border data rules, cybersecurity requirements, and merger review. One provision closes a familiar workaround by prohibiting the use of technical personnel, technical guidance, overseas work assignments, cross-border training, and similar arrangements to evade Chinese restrictions on transferring goods, technology, services, or related data.

The regulation also looks outward. It authorizes Chinese authorities to respond when foreign governments, organizations, or individuals discriminate against Chinese investors or improperly restrict their investments. Companies with operations, sales, or assets in China must now account for the possibility of Chinese countermeasures. More on that below, because companies with business in China now have another risk to consider on the other side of the border.

These restrictions are unlikely to affect a routine investment in a nonsensitive business. But for anything touching advanced technology, sensitive data, infrastructure, manufacturing, or another strategically important sector, it can decide whether the deal happens.

I Have Seen This Problem in Court

A few years ago, I testified as an expert witness in a California trial involving Chinese investment in a U.S. company. One issue was the value of the work the plaintiff had performed in helping a Chinese investor secure the Chinese government approvals needed to move millions of dollars into the United States. I testified that the plaintiff had done an exceptional job, for a simple reason: getting substantial investment money out of China is hard. Most recipients never see the work required to secure the approvals, satisfy the banks, and complete the remittance. Taking a transaction from deal structure through the Chinese regulatory process, foreign exchange, banking, and actual remittance takes many months and sometimes more than a year, even when everything eventually clears and nobody does anything wrong.

I testified that the plaintiff’s work had real value because the outcome was never automatic. That is why I tell clients never to confuse a Chinese investor’s willingness to invest with its ability to fund.

ODI Is a Closing Issue

Under the NDRC’s Enterprise Outbound Investment Measures, sensitive projects generally require approval and non-sensitive direct investments generally require filing, with commerce, foreign-exchange, and banking procedures sitting alongside them. For the foreign company waiting on the wire, the terminology matters far less than whether the process is finished. When funding day arrives, the investor needs the documents and registrations its bank requires before it will convert currency and send money offshore. If those steps are incomplete, the money does not move. Goodwill changes nothing. Before you rely on a Chinese investor’s closing date, find out what still has to happen inside China before the funds can reach your account.

Do Not Confuse the Government Clock With the Deal Clock

Published regulatory processing periods give parties false comfort. A filing may carry a short formal processing period once a complete submission has been accepted. That tells you almost nothing about when the money will land. Before the clock starts, the investor may need to settle the transaction structure and source of funds, obtain internal approvals, assemble supporting documents, respond to regulator questions, complete foreign-exchange procedures, satisfy its bank, purchase foreign currency, and arrange the remittance. Questions about the structure, valuation, investor, funding source, or underlying transaction add time at every stage.

The only timetable that matters to the company receiving the investment runs from the day the deal is agreed until the day the money arrives. If your Chinese investor can get the money in one year, from start to finish, count yourself as lucky.

Find Out Where the Money Is

Start with a question that sounds too simple to ask: where is the investment money right now? Money already lawfully held outside China presents a completely different problem from renminbi sitting in a Chinese bank account. The answer largely determines whether ODI approval will delay or derail the investment.

Next, identify the actual investor. Many deals are papered through a Hong Kong, Singapore, or BVI entity, but the signature page does not answer the ODI question. What matters is where the money originates, who controls the offshore entity, and how it was funded. A Hong Kong holding company that must receive its investment capital from the mainland presents the full ODI problem. An offshore company using lawfully accumulated offshore earnings may not. You need to know which one you are dealing with.

Then examine the investor’s compliance history, because Chinese outbound investors carry continuing obligations after the original ODI procedures are complete. Among them is an annual ODI stock-equity registration, filed during the first half of each year. SAFE places a delinquent investor under business controls, and its bank cannot process capital-account foreign-exchange business until the lapse is cured. A transaction that has cleared its principal ODI procedures can therefore remain unfundable for reasons having nothing to do with that transaction. Almost nobody on the foreign side thinks to ask about this. Ask about it. SAFE’s direct-investment foreign-exchange notice sets out the control mechanism, and its 2026 filing notice confirms the January 1 through June 30 reporting period.

Identify the investor, trace the funds, determine the applicable ODI route, and demand evidence of what has been completed. Do not put weight on “we have done this before.” The previous deal may have involved a different investor, bank, industry, structure, destination, or funding source, or money already sitting offshore. The transaction itself matters as well. Sensitive countries and industries receive different treatment. Acquisitions and greenfield investments present different documentation and review issues. Complicated offshore structures, related-party transactions, unusual valuations, and round-trip arrangements invite scrutiny.

In the old days, quick deals usually meant the money was already in Hong Kong. I remember our lawyers struggling with funding delays while headlines announced that one Chinese company after another had just acquired an American company. Our clients naturally asked why those buyers could move their money so quickly while their investors could not. I began calling the lawyers who handled those deals to find out what they were doing differently. The answer was nothing. The press had simply left out that the money was already outside China or that the Chinese company named in the headline was not even the buyer. The purchaser was a Hong Kong or British Virgin Islands entity.

Preliminary ODI funding creates another trap. China permits certain preliminary ODI expenses to be remitted before the full investment process is complete, including legitimate costs such as due diligence and professional fees. SAFE removed the old US$3 million ceiling in December 2023, though preliminary expenses generally remain capped at 15 percent of the proposed Chinese investment. If the project is not established within six months, unused funds generally must be returned; the original registration bank can extend the period, but not beyond twelve months in total. Money arriving through that channel shows that the investor is serious and has begun the process, not that it can fund the transaction. The money is not necessarily permanent either. SAFE’s 2023 amendment removed the dollar ceiling, and SAFE’s published guidance explains the return deadline.

Remember the Other Side of the Border

Chinese approval does not end the regulatory inquiry. The destination country may conduct its own foreign-investment review.The destination country may impose its own foreign-investment review, and in the United States a Chinese investment can raise CFIUS issues, particularly where the target involves critical technology, infrastructure, or sensitive personal data. Europe, Australia, and other jurisdictions run their own screening regimes. The deal has to work in both directions. That analysis belongs at the beginning of the transaction, not a week before closing. Our post on U.S. foreign investment and the new CFIUS rules explains the U.S. side in greater detail.

Order No. 837 adds a new complication. It authorizes Chinese authorities to act against foreign states, organizations, and individuals that discriminate against Chinese investors or unreasonably deprive them of their rights. Available responses include restrictions on China-related investment, transactions, cooperation, entry, and imports or exports. An adverse CFIUS or European screening decision will not automatically trigger Chinese retaliation, but a U.S. or European company with meaningful China exposure can no longer treat the destination country’s screening decision as a purely local event. If your company sells into China, sources from China, or holds Chinese assets, potential Chinese countermeasures belong in the risk analysis before you sign.

Put the ODI Risk in the Deal Documents

If closing depends on Chinese ODI and foreign-exchange procedures, the investment agreement should say so. Depending on the transaction, I would consider:

• A regulatory closing condition. The investor is not ready to close until the required Chinese ODI and foreign-exchange steps are complete. The agreement should define readiness that way rather than leaving it to assumption.
• A covenant to move promptly. Require the investor to make the necessary submissions, respond to regulators and banks, and pursue the process diligently.
• Evidence of progress and completion. Specify the filings, receipts, and registrations the investor must produce instead of accepting assurances that everything is being handled.
• A realistic outside date. Base it on the actual regulatory path, not an arbitrary 30- or 60-day closing period borrowed from a domestic deal.
• A reverse termination fee. These fees are common in larger Chinese outbound acquisitions where regulatory clearance or financing presents a material closing risk. They put a price on the investor’s failure to deliver the funds it promised. Whether one makes sense, and at what amount, depends on the size and structure of the deal.
• Clear consequences if the money cannot move. Address termination rights, transaction expenses, extensions, and what happens to any deposit or preliminary funding already received.
• Protection before funding. Do not hire employees, sign leases, make acquisitions, turn away other investors, or take another irreversible step on the strength of money that has not arrived.

Back in the early 2000s, when many Chinese companies barely understood China’s ODI rules, we persuaded one to pay our client a $500,000 nonrefundable deposit, from funds it had in Hong Kong. The buyer was a large Chinese clothing company seeking to acquire a small aircraft manufacturer. Our lead China lawyer, who has long since retired, insisted that China would never approve the deal. He was right. The deal failed, and our client kept the $500,000. The Chinese company returned about a year later. It did not ask for its deposit back; it simply said it could complete the acquisition this time. Our lawyer again said China would not approve it. And, again, he was right. The lesson is that it is important you not just anticipate China’s restrictions, you also seek to allocate that risk to the Chinese buyer. I should mention, though, that the Chinese buyers of today tend to be more savvy and less optimistic than they were then.

Before You Count the Money, Ask Whether It Can Leave China

We have written for years about the risks of trying to get money out of China through unofficial channels. The rules change, enforcement changes, and the geopolitical overlay keeps growing more complicated. The underlying business problem remains the same. Order No. 837 has not made outbound investment impossible. It has made the process more formal, coordinated, and security-conscious.

A Chinese investor’s balance sheet tells you whether the money exists. Its ODI approvals, foreign-exchange registrations, and banking arrangements tell you the likelihood of whether that money will ever reach your account. Do not treat the investment as real until you have satisfactory answers on both.