If you are raising funds for your business and have recently been in touch with Chinese investors you are probably aware to the new Outbound Direct Investment (ODI) regime in China and the crack down on RMB outflow from China. If you are related to the Chinese arena but have not yet heard of last year end's turmoil, you may find numerous online articles and opinion and media coverage on the subject matter. If you want to read some initial information in Hebrew, click here and here for start.

While the implementation of the new ODI regulations remained unclear during the month in which it was initially exposed, the government has quickly begun to remove the vagueness. Last month, the State-owned Assets Supervision and Administration Commission ("SASAC") has amended and released the Measures for the Supervision and Administration of Investments Made by Central Enterprises and the Measures for the Supervision and Administration of Outbound Investments Made by Central Enterprises (collectively the "Measures"). Both measures came into force as on 7 January 2017. According to the Measures:

SASAC will formulate a Negative List for outbound investment projects by central enterprises, and specify outbound investment projects that are prohibited and subject to special regulation. Central enterprises will not be allowed to invest in ODI projects in industries marked as 'prohibited' under the Negative List. In addition, projects classified as being subject to special regulation by the negative list, shall be submitted by the central enterprises to the SASAC for review and approval. ODI projects outside the scope of the Negative List will be contemplated and decided upon independently by the central enterprise.

In principle, no central enterprise is allowed to engage in any investment which is not directly related to its core business. Where any central enterprise desires to invest in a non-core business for any special reason, such enterprise shall submit to the SASAC for examination and decision-making, an application to approve such non-core investment, and shall make the investment by means of cooperating with a central enterprise having competitiveness in the said business.

The new ODI Regime was initiated late November 2016, when the People's Bank of China issued an internal notice aimed at restricting overseas investments (the Notice). The Notice listed a series of new regulations to prohibit the filing or approval of overseas investment projects and thereafter MOFCOM has published in its website the new working procedures for the review of ODI projects, however, the above Measures are the first official legislation, enacted in order to implement the Notice. These Measures cover ODI projects led by Central Enterprises, that is, State Owned Entities (SOE) directly related to the NDRC. Those SOEs which are controlled by the local DRCs are not covered by the Measures and their ability to engage in outbound investments is governed by the specific province of their domicile.

The Negative List is yet to be issued and so is the detailed process for the approval or filing of the special overseas investment projects made by central enterprises.


While the government sets new rules to regulate ODI and avoid uncontrolled outflow of RMB from China, it also takes measures to encourage Foreign Direct Investments into Mainland. On January 12, the State Council issued the Notice of the Several Measures for Opening Wider to the Outside World and Making Active Use of Foreign Investment (" Notice").

In order to promote FDI and attract new investments in China, and based on the Notice, MOFCOM and NDRC are now amending the Investment Catalogue to further relax the restrictions on foreign investment. The current Investment Catalogue was lastly amended in 2015. The newly drafted Catalog will remove another layer of restrictions and obstacle from the long access way to the PRC and enhance the opening up (for example, the new catalog will reduce the prohibited industries from 93 in 2015 to only 62 today). Highlights of the Notice as are follows:

The Notice emphasizes the need to further expand the opening-up, to create a market environment of fair competition and to redouble efforts to attract foreign investment. The Notice clearly states that the Catalogue of Foreign Investment will be amended to relax the restrictions imposed on the foreign access to various sectors including inter alia the service sector, the manufacturing sector and the mining sector. The government is now gathering public comments in order to finalize the amended Catalogue.

With respect to the service sector, focus will be put on relaxing limitations on foreign access to banking financial institutions, securities companies, securities investment fund management companies, futures companies, insurance institutions and insurance agencies, while the limits on foreign access to accounting, auditing, architectural design, rating service and other fields will be lifted. Further, telecommunications, internet, culture, education, and transportation sectors will be opened up gradually.

As to the manufacturing sector, emphasis will be put on eliminating restrictions previously imposed on foreign access to the manufacturing of railway transportation equipment, manufacturing of motorcycles, production of fuel ethanol, processing of grease and other fields.


Last year, the Chinese government reformed the administration of record-filing for the establishment of, and change to, foreign invested enterprises (FIE). Under the new regime, FDI projects that do not fall within a Negative List only require a record-filing procedure through MOFCOM's online system before the registration, or as late as 30 days after the registration at the local Administration of Industry and Commerce (AIC). Under this regime, foreign investors were not required to manually approach MOFCOM and apply for the approval of a certain project which is not covered by the Negative List. This has definitely expanded the foreign economic cooperation and technological exchange and shortened the setup time of FIEs.

For foreign investment projects subject to the approval of the National Development and Reform Commission (NDRC), NDRC is determined to further delegate its approving authority in order to adhere to the ongoing trend of further relaxing the restrictions on foreign investments. As such, NDRC has recently issued the Notice on Properly Performing Relevant Foreign Investment Work for Effective Implementation of the Catalogue of Investment Projects Subject to Government Verification and Approval (2016 Version) ("Circular"). According to the Circular, less and less foreign investment projects will be subject to the approval of the central government:

The Circular clearly states that any project in the restricted industries of the Catalogue for the Guidance of Foreign Investment Industries (the " Catalogue") with a total investment amount (including capital increase) of USD 300 million or above shall be examined and approved by the NDRC, while projects with a total amount of USD 2 billion or above shall be submitted to the State Council for the record. The restricted industries in the Catalogue includes, inter alia, printing of publications, smelting and separation of rear earth, manufacturing of automobile whole vehicles, special use vehicles and motorcycles, telecommunications, etc; It should be noted that previously, even projects in encouraged industries (with total amount exceeding USD 300 million) required the approval of NDRC, however, it can be drawn that pursuant to the new Circular, the Development and Reform Commission will no longer require to review and approve projects within those industries defined as encouraged.

Other projects in the restricted industries of the Catalogue which are invested with a total amount of less than USD 300 million shall be examined and approved by the provincial government.


The State Administration of Foreign Exchange (SAFE) issued the Notice on Further Pushing Forward Foreign Exchange Administration Reforms and Improving Authenticity and Compliance Review on Jan 26, 2017 (" Notice"). The Notice sets out 9 measures revolving around the following three priories:

Deepening reforms to enhance trade and investment facilitation, such as expanding the scope of foreign exchange settlement in foreign exchange loans, foreign accounts of overseas institutions in the Free Trade Zone can handle the foreign exchange settlement ;

Improving administration by tightening authenticity and compliance reviews, such as specifying the document list of foreign exchange profits export business which is more than USD 50 thousand;

Strengthening statistical operations, incorporating local and foreign currency administration.

(source: WestLawChina)


Along with the rapid development of the online shopping, online payment and mobile payment have become the most popular and common way of payment in China. An increasing amount of offline stores have joined the trend, and gradually expand the use of mobile wallets via payment apps, such as Alipay of Wechat, as a main method of payment, in order to encourage and facilitate consumption.

In several metropolises like Beijing and Shanghai, you can actually leave your house for shopping without a wallet, knowing that your fun shopping plans will not become a frustrating window-shopping experience. You can go shopping without any traditional mean of payment, while using the payment apps in your cellphone to pay the bills. In order to pay the bills, you will recharge the money in your personal account in the payment apps or simply link the mobile app directly to your bank account.

If you – like many other consumers – are no longer a fan of brick and mortar shopping, you are probably using various online shopping arenas e.g. Taobao (the biggest online shopping platform, like eBay), as your main venue of your shopping sprees. When you purchase via Taobao and pay the money to the seller, before you receive the ordered goods, your money is held in an Alipay account. Once you confirm receipt of the goods, Alipay will release the money to the seller. The money put in Alipay or other payment apps is called 'customer deposit reserves'. The total amount of such reserves is enormous. By the end of 2016, the amount of customer deposit reserves deposited in 267 payment institutions in China, was more than RMB 500 billion. (Data resource: http://finance.ifethe ng.com/a/20170116/15147786_0.shtml).

As the government is concerned of the risk inherent in such customers deposit reserves (e.g. the ease of diverting the reserves to pay other debts, to invest or otherwise use the funds for purposes other than to the matter it was paid for), the People's Bank of China (PBC) has issued the Notice on Matters Concerning Centralized Custody of Customer Deposit Reserves of Payment Institutions on Jan 13, 2017 (" Notice") to regulate the management of the customer deposit reserves.

According to the Notice, as of April 17 2017, payment institutions should transfer customer deposit reserves collected according to the stipulated percentage, into designated corporate deposit accounts; no interest will be accrued on funds deposited in these accounts for the time being.

The PBC will determine the customer reserve rates of payment institutions according to the types of businesses they operate and their latest classification; customer reserve rates shall be subject to adjustment if deemed necessary by the PBC.

The amount of customer reserve payable by a payment institution will be calculated based on the average daily balance in the previous quarter and the customer reserve rate specified for the institution, and will be reviewed on a quarterly basis.


On Jan 4, 2017, the State Administration for Industry and Commerce (SAIC) has issued the amended Trademark Review and Examination Criteria. To better implement the Trademark Law, a set of new criteria was released, which includes the following:

Audio trademark review criteria: The audio trademark is divided into two forms: music and non-music; the music trademark shall be described by stave or numbered musical notation and the non-music trademark shall be described by text; it shall not be identical or similar to national anthems, military songs or international songs

Application for a registered trademark which is cancelled or declared invalid: the application of the trademark which is identical or similar with such cancelled trademark will be rejected during one year after its cancellation.

Stakeholder identification: the following person can be deemed as the stakeholder of the prior trademark right: the licensee of the prior trademark right, the legal successor of the prior trademark right, and the pledgee of the prior trademark right.

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.