On October 12, 2011, the Ministry of Commerce
(MOFCOM) promulgated the Circular on Issues
Relating to RMB Cross Border Direct Investment dated (the
"Circular"). The Circular provides that
outbound investors (including investors of Hong Kong, Macao and
Taiwan) can make direct investment with RMB funds they obtained
legally outbound (the "Offshore
1. Scope of Offshore RMB
The Offshore RMB mainly includes (1) RMB legally acquired by
foreign investors through settlement of international trade; (2)
RMB remitted outbound which acquired through profit
distribution, equity transfer, reduction of registered capital,
liquidation or early return of investment in mainland China and (3)
RMB legally acquired or raised through issuing RMB bonds or stocks
outbound and other legal channels.
2. The Industries the Offshore RMB Can Be Invested in
The Circular provides that Offshore RMB investment shall comply
with foreign direct investment rules in China, and it also provides
some exceptions for Outbound RMB investment, such as the securities
or financial derivatives in mainland China. In addition, the
Outbound RMB can not be invested in entrustment (inter-company)
3. Investment Approval Procedure
Generally, the approval authorities are unchanged. The commerce
departments at all levels are responsible for examination and
approval of offshore RMB direct investment review. The provincial
authorities must submit with MOFCOM for review before approving of
investment under the circumstances that: (1)investment amounts to
RMB300 million Yuan or above or investment in financing
guarantees; (2) investment in foreign invested investment companies
; and (3) investment in sectors that are subject to macro-economic
control of the State, such as sectors as cement, steel and iron.
MOFCOM will gradually simplify the procedures concerned based on
the practice of cross-border RMB direct investment.
It can be inferred that Offshore RMB can be used to invest in a
foreign invested investment company (e.g. a PE firm) in
China. However, in addition to the usual approval procedures
for all foreign investments, it is also subject to MOFCOM approval
(as described above). The prolonged approval procedure may cause
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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