On August 18, 2017, the State Council of China issued a notice forwarding the Guiding Opinions on Further Guiding and Regulating the Direction of Outbound Investments (the Guiding Opinions) as jointly drafted by the National Development and Reform Commission (NDRC), Ministry of Commerce (MOFCOM), People’s Bank of China (PBOC) nd Ministry of Foreign Affairs. The Guiding Opinions are the first official rules adopted after China increased its control over capital outflows in late 2016.

In 2016, the value of the RMB depreciated over 6% against the US dollar and China’s foreign exchange reserves dropped sharply. Among different types of capital outflows, China’s outbound direct investment (ODI) continued to surge, with a 53.7% increase on a year-on-year basis in 2016. Such depreciation in the value of the RMB and the continuous and extraordinary levels of capital outflows have been cause for concern in the Chinese government, and since late 2016, there has been widespread media coverage of China’s restrictions on outbound investments by Chinese companies. For instance, the State-owned Assets Supervision and Administration Commission, in line with such regulatory trends, promulgated new rules tightening outbound investments by central state-owned enterprises. While some other measures reported by the media have not been adopted in official rules, both public statements made by Chinese government officials and our experience in various transactions both suggest that such new measures have in practice been implemented.