China Newsletter | Q3 2025/Issue No. 65

In This Issue:

Foreign Investment | Labor & Employment | Compliance | Corporate | Data Privacy & Cybersecurity | Healthcare & Life Sciences

This China Newsletter provides an overview of key Q3 2025 developments in the following areas:

1. Foreign Investment

• New Measures to Encourage Reinvestment by Foreign-Invested Enterprises
• Implementation Rules for Hainan Free Trade Port Cross-Border Asset Management Pilot

2. Labor & Employment

• Judicial Interpretation (II) on Application of Law in Labor Dispute Cases

3. Compliance

• Compliance Guidelines for Charging Behaviors of Online Trading Platforms

4. Data Privacy & Cybersecurity

• Measures for the Administration of Cybersecurity Incident Reporting

5. Healthcare & Life Sciences

• The NMPA Issued New Measures on Importing Overseas Marketed Drugs Before Domestic Approval

Foreign Investment & Incentives

New Measures to Encourage Reinvestment by Foreign-Invested Enterprises

国家发展和改革委员会等七部门联合发布《关于实施鼓励外商投资企业境内再投资若干措施的通知》

On July 7, 2025, China's National Development and Reform Commission (NDRC), along with other authorities, issued a notice to promote the reinvestment of profits by foreign-invested enterprises (FIEs) within China. The measures aim to attract and retain foreign capital by simplifying processes and providing incentives, aligning with broader efforts to stabilize foreign investment amid global economic uncertainties. This policy builds on prior tax deferral incentives and may benefit multinational corporations looking to expand operations in China.

Key provisions include:

1. Project Inclusion and Support: Eligible reinvestment projects may be added to a national library of major foreign investment initiatives, granting access to preferential policies such as land supply guarantees and expedited approvals.
2. Flexible Land Use: FIEs may adopt long-term leasing, lease-then-transfer, or elastic-term transfer models for industrial land to reduce upfront costs while complying with encouraged industry policies.
3. Simplified Approvals: For wholly owned new entities, industry access permits from parent companies may be leveraged to accelerate reviews if basic conditions are met.
4. Tax and Import Benefits: Reinvestments in specific industries qualify for tax incentives and duty exemptions on imported equipment.
5. Foreign Exchange Flexibility: Legal profits in foreign currency may be transferred domestically for reinvestment without additional restrictions.
6. No Registration Requirement: Reinvestments using foreign capital or converted funds bypass domestic registration if compliant with access measures.
7. Financing Optimizations: Related-party loans and panda bonds for qualifying projects receive green-channel treatment; NDRC encourages financial institutions to innovate products under risk controls.
8. Information Sharing and Pilots: Departments will pilot streamlined reporting and enhance data exchanges to facilitate policy access, with evaluations focusing on socioeconomic contributions.

Eligibility applies to FIEs using undistributed profits or foreign investors reinvesting distributed profits in new projects, acquisitions, or equity investments, provided they are genuine and compliant. Businesses may wish to assess projects for inclusion in encouraged catalogs to maximize benefits.

Cross-Border Asset Management Pilot in Hainan Free Trade Port (FTP)

《海南自由贸易港跨境资产管理试点业务实施细则》

To advance Hainan FTZ's role as a hub for high-level opening-up, five regulatory authorities—including the People's Bank of China (PBC) Hainan Branch, China Securities Regulatory Commission (CSRC) Hainan Bureau, and SAFE Hainan Branch—issued the Detailed Rules for Cross-Border Asset Management Pilot in Hainan Free Trade Port on July 22, 2025, with an effective date of Aug. 21, 2025. The pilot, initially capped at RMB 10 billion (adjustable by the PBC Hainan Branch), creates a regulated channel for foreign investors to access China's onshore asset management market while enabling domestic financial institutions to test cross-border RMB business innovations.

Eligible participants in the pilot include pilot banks (providing account services), product issuers (licensed financial institutions in Hainan), and distributors (licensed financial entities), all of which must submit internal control frameworks, risk prevention plans, and investor protection measures to regulators—with non-compliant institutions subject to exit mechanisms. Qualified products are limited to RMBdenominated offerings with risk ratings R1-R4 (low to medium-high) covering wealth management products, private asset management products (securities/futures funds), public funds, and insurance asset management products, all of which must invest in China's onshore market.

Foreign investor eligibility is clearly defined: during the initial 180-day pilot phase, institutional investors include overseas licensed financial institutions and overseas branches of legal Chinese enterprises (with broader access expected later), while individual investors are restricted to overseas individuals studying, working, or living in Hainan for at least one year (who must provide proof of RMB income sources in China). Account and fund management rules emphasize safety and transparency: investors must use dedicated "investment accounts" for all transactions, with funds required to be returned via the original route, and no daily remittance limit applies to Hong Kong, Macau, and Taiwan residents. The pilot prioritizes risk control and investor protection: China's domestic laws govern investor rights, distributors must provide clear complaint and arbitration channels, and regulators will closely monitor for abnormal activities such as money laundering or investment with non-equity capital.

For foreign financial institutions, the pilot may offer a valuable testing ground to explore cross-border RMB asset management business in a controlled environment, while foreign investors might gain a regulated pathway to allocate capital to China's onshore markets—leveraging Hainan FTZ's preferential policies and streamlined procedures. The initiative underscores China's commitment to gradual financial opening-up and positions Hainan as a key gateway for cross-border capital flows.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.