Authors: Ren Gulong、Zhang Jiaqi

On 23 October 2019, the State Administration of Foreign Exchange (“SAFE”) issued a Circular on Further Promoting Cross-border Trade and Investment Facilitation (关于进一步促进跨境贸易投资便利化的通知) (“Circular No. 28”) which introduced 12 measures to further facilitate cross-border trade and investment. Among them, there are three key reforms in respect of foreign investment, foreign debt and sale of non-performing credit assets.


All foreign-invested enterprises are permitted to make equity investments in the mainland with its capital funds. Previously, only foreign-invested investment companies, whose business is equity investment (the “Investment Enterprise”) were entitled to making equity investment with its capital funds. Other foreign-invested enterprises (the “Non-investment Enterprise”) were only allowed to invest with its profits from its operation in China.

Pursuant to Circular No. 28, a Non-investment Enterprise is now allowed to make domestic equity investment with its capital funds, provided that (i) the investment does not violate the existing special administrative measures for foreign investment access (negative list); (ii) the projects invested are real and in compliance with law; and (iii) the investment is in conformity with the national macro-control policies.

With this reform, all foreign-invested enterprises, whether or not established to conduct investment businesses, will be able to make domestic equity investment. As there are less than 3,000 Investment Enterprises in China, accounting for less than 1% of all foreign-invested enterprises, a great number of Non-investment Enterprises will benefit from this reform.


Since 2016, People’s Bank of China (PBOC) and SAFE adopted the policies of full-coverage macro-prudent management of cross-border financing, which allows any company in China to borrow foreign debt within the limit of twice of its net assets. Since then, prior approval from SAFE for such foreign debt had been abolished and replaced by post filing to local branch of SAFE (“SAFE Filing”).

Circular No. 28 further simplifies the SAFE Filing process from two aspects:

  • A non-financial enterprise in Guangdong-Hong Kong-Macau Greater Bay Area (“GBA”) or Hainan will not be required to do the SAFE Filing each time when borrowing a foreign debt. Companies in GBA and Hainan may apply for a one-off SAFE Filing.
  • Banks are authorized by SAFE to conduct the SAFE Filing so that the borrower does not need to go to the office of local branch of SAFE.


In 2017, SAFE authorized its Shenzhen Branch to set up a pilot program for cross-border transfer of non-performing loans. On 8 May 2018, the pilot program was enhanced by (i) removing the expiration date of the program; (ii) replacing the “pre-approval” of cross-border transfers with a “pre-filing” process; and (iii) allowing receipt of trading deposits from foreign investors via foreign debt accounts.

Circular No. 28 further upgraded the pilot program by: (i) expanding the geographical scope to cover GBA and Hainan; (ii) allowing banks to sell non-performing credit assets directly to foreign investors, instead of through the asset management companies; and (iii) expanding the scope of assets to non-performing trade finance assets, in addition to loans. This reform will provide more opportunities for foreigners to participate in China’s non-performing market.


Circular No. 28 grants more autonomy to banks and enterprises and make it more convenient and efficient for honest enterprises to carry out cross-border business activities.

According to the press conference of SAFE, the regulatory authorities will, continuously promote the liberalization and facilitation of cross-border trade and investment, and steadily advance the opening-up regarding capital accounts. It will be expected that further regulations may be launched in the near future, including for example (i) improving the pilot program on foreign exchange settlement and sales businesses of securities companies so that more participants may take part in the foreign exchange market; (ii) supporting the development of trading rules on “Sci-Tech Innovation Board” and enhancing the cross-border fund management of depository receipts under the “Shanghai-London Interconnection”; and (iii) standardizing the administration of bond issuance on the mainland by foreign institutions. We will keep a close eye on it.