New rules effectively protect outbound investments

Editor's note: China has revised its rules for outbound investment, aimed at providing stronger institutional support for its development and security. Jiemian News spoke to Che Luyao, an associate professor at the School of International Law at China University of Political Science and Law, to understand the new changes. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

The new measures, which will come into effect from Dec 1, broaden the definition of "investors" to include domestic enterprises, individual residents and other entities.

This change aligns with China's efforts to ensure fair competition and create a favorable development environment. Previously, rules focused on "enterprises", whereas the new approach places greater emphasis on "investment behavior". The same rules for protection and oversight will apply to all outbound investments, no matter whether the investor is a State-owned enterprise, a private company or an individual.

The international landscape for outbound investments is "evolving". Some countries and regions have erected barriers, citing so-called national security concerns, and some have even demanded that Chinese parties transfer equity or hand over data. The old rules provided only general principles to deal with such situations without offering concrete guidelines.

For years, Chinese companies investing overseas had limited recourse when faced with unfair treatment in host countries. Commercial negotiations often proved inadequate against host government policies, while litigation was hampered by lengthy court proceedings, high costs or difficulties in enforcing court decisions.

Under the old rules, investment enterprises mainly reported issues such as personnel casualties and asset losses. The new measures explicitly require investors to report any foreign demands for technology or data, or any attempt to transfer or dispose of assets and equity in ways that threaten China's national interests or security.

More important, the new measures authorize the National Development and Reform Commission, China's top economic planner, to take concrete steps to safeguard investors' rights. If annual reports indicate that investments are adversely affected by discriminatory measures or unfair deprivation or restriction by foreign entities, the NDRC may, at the investor's request, prohibit or restrict the relevant foreign organizations or individuals from investing in China or limit domestic entities from cooperating or conducting transactions with them.

The previous rules established a tripartite framework of "service, management and protection" for managing outbound investments. The new measures operationalize this framework. They align with existing laws and regulations in areas such as export controls and data security, further enhancing the legal framework for foreign-related matters.

Also, the new measures reflect a more comprehensive oversight approach. The regulatory system will now extend beyond pre-investment approvals to cover the entire life cycle of outbound investment. The scope of regulation has expanded to include all types of investors and investor protection efforts have evolved from limited, reactive responses to proactive measures.

For both enterprises and individuals, the new measures send a clear signal encouraging outbound initiatives while providing a well-defined compliance road map.

Entities planning to expand overseas should use the measures as a guide to audit their obligations and enhance compliance capabilities as a core competitive strength in their global operations. With complementary templates and operational guides gradually being issued, investors can expect a smoother, more stable and sustainable path toward expansion.