To facilitate cross-border trade and investment, SAFE introduced:

• 6 measures to streamline cross-border trade in goods;
• 6 measures to ease controls over foreign exchange settlements and the use of foreign currency capital;
• consolidation of the relevant categories of foreign exchange accounts.

FIE InvestmentsIn our view, foreign-invested enterprises (FIEs) in China will benefit from the reform, particularly FIEs whose principal activities are not investment-related and which will now be permitted to make equity investments.
Before this change, an FIE had to include “investment” within its registered business scope in order to invest in equity.

Previously, such FIEs faced several constraints:

• obtaining regulatory approval to include “investment” in their business scope was extremely difficult;
• the available structures for conducting investment activities were generally limited to establishing a foreign-invested holding company, venture capital or private equity enterprise, or a QFLP fund, all of which were subject to strict requirements and restrictions.

As a result of the reform, foreign investors can now invest in multiple Chinese entities through an FIE, effectively using it as a quasi-holding structure in China.

FIEs may subsequently invest in domestic enterprises either in foreign currency or in renminbi, provided that the proposed investment:

1. is genuine and compliant with applicable requirements; and
2. complies with restrictions under China’s national Negative List.

It remains unclear how these two conditions will be implemented in practice, particularly in sectors included in the national Negative List.

At the same time, the launch of these reforms means that foreign-invested holding companies and QFLP structures may become somewhat less attractive options.