The timing of these reforms is not accidental.They directly respond to the blueprint established at the Third Plenum of the 20th CPC Central Committee, which set out China’s vision for a “high-level opening-up and high-quality development” phase.
China’s economy, while strong, is adjusting to new realities: slower global demand, digital transformation, and the need for capital to serve real-economy sectors such as advanced manufacturing, clean energy, biotechnology, and infrastructure modernization. By removing low-value administrative frictions, SAFE is signaling a shift from controlling every inflow and outflow to managing risk through transparency and accountability.
The broader aim is to attract long-term productive capital, not speculative “hot money.”
These FX measures also align with other national strategies, including the internationalization of the Renminbi (RMB), incremental capital-account convertibility, and financial liberalization pilot programs in key zones such as Shanghai, Shenzhen, and Hainan. While many economies around the world have tightened their capital controls to manage currency risk, China is taking a different route: making compliant cross-border flows easier, faster, and safer.
Under the new framework, SAFE has made several procedural breakthroughs that reshape how foreign investment enters China.
(1) No more pre-registration for pre-establishment expense accounts.
Foreign investors setting up a new company in China can now directlyopen a pre-establishment expense account at a commercial bank and wirefunds immediately. This means that early-stage payments for office rent, consultancy fees,recruitment, or feasibility studies no longer require prior SAFE registration.
The reform significantly shortens the early setup phase for foreign-investedenterprises (FIEs).
(2) No registration needed for FIEs’ domestic reinvestment.
When an existing FIE decides to reinvest in another onshore entity, thereceiving company and the seller are now exempted from the basic informationfiling process. Funds can go directly into the designated capital account as long as theinvestment complies with China’s negative list and authenticity checks. What started as a regional pilot is now a nationwide norm, creating smootherreinvestment loops.
(3) FX profits can be reinvested onshore.
SAFE now permits lawfully earned FX profits either generated by the FIEor remitted by the overseas shareholder to be reinvested domestically withoutconversion complications. The funds can be credited to the investee’s capital account or the seller’ssettlement account, enabling companies to compound their earnings within China.
(4) Research institutions receive FDI-like treatment.
Non-enterprise research organizations, such as universities or publicresearch labs, can now register and manage FX inflows under the same frameworkused by foreign investors. This reform encourages smoother management of international research grants,collaborative programs, and joint-innovation funds.
Impact:
These four adjustments simplify corporate structures, reduce repetitivefilings, and promote collaboration between global investors and domesticinstitutions. They collectively make China’s investment environment more efficient,predictable, and innovation-friendly.
One of the most transformative sections of the 2025 SAFE circular focuses on cross-border financing for high-tech enterprises especially those recognized as “专精特新” (specialized, sophisticated, distinctive, and innovative).
(1) Expanded Borrowing Limits
Eligible firms can now borrow up to USD 10 million in foreigndebt without going through complex case-by-case approvals.
Companies that have earned a strong “Innovation Points” rating based on R&Doutput, patent ownership, and industry contribution can borrow up to USD 20million. This policy creates a bridge for SMEs to access international fundingfor technological upgrades, equipment purchases, and product expansion.
(2) Simplified registration requirements.
Previously, enterprises were required to submit the previous year’s audited financial reports when registering cross-border loans.
Under the new system, this step is abolished. Companies can proceed to sign and draw loans, while banks will later verify authenticity through post-transaction checks.
Outcome:
This dramatically cuts processing time often saving several weeks and empowers small and medium-sized innovators to capture market opportunities more quickly.
The reforms not only loosen restrictions but also refine supervision mechanisms.
(1) A shorter and clearer “negative list.”
SAFE has reduced the categories of prohibited use for capital-account income. Non-financial firms must still adhere to the authenticity and self-use principles, meaning funds cannot be diverted to speculative investment, high-risk financial products, or loans to unrelated companies.
However, enterprises can still invest in low-risk wealth-management instruments and structured deposits, giving treasuries more flexibility in liquidity management.
(2) Shift from pre-approval to post-monitoring.
Rather than vetting every transaction in advance, SAFE now empowers banks to determine inspection frequency based on a company’s compliance record and risk level. Good-standing clients may face fewer checks; high-risk or opaque firms may be reviewed more often.
This risk-tiered approach strikes a balance between facilitation and control.
(3) Simplified FX settlement for overseas individuals buying property.
Foreigners who meet local real-estate eligibility rules can now settle FX payments based on the signed purchase contract, submitting the official filing certificate afterward. This sequencing correction speeds up legitimate purchases without changing ownership rules.
The new rules allow multinational companies and established FIEs to recycle profits and capital more easily.
They can reinvest earnings onshore without the burden of multiple filings or long verification delays.
This policy strengthens China’s appeal as a location for regional headquarters, manufacturing reinvestment, and M&A expansion.
For investors entering China for the first time, the cancellation ofpre-establishment registration reduces entry barriers.
It is now simpler to fund feasibility studies, open local offices, or launchpilot operations before full incorporation.
Access to offshore borrowing also provides flexibility to finance growthwithout immediate domestic lending.
Multinational R&D centers and universities benefit from FDI-like access to manage cross-border scientific funding.
This means smoother administration of joint-innovation projects, scholarship funds, or international collaborations aligning with China’s ambition to be a global innovation hub.
While the reforms are generous in facilitation, they do not signal deregulation.
The principle of “authenticity and self-use” remains the cornerstone of China’s FX system.
Banks now act as the first line of defense. They evaluate the credibility of documents, monitor fund movements, and flag irregular transactions.
Companies with clean transaction histories enjoy smoother service; those with weak internal controls will face enhanced scrutiny.
Certain red lines remain non-negotiable:
(i)Capital-account income cannot be used for speculative securities or unapproved investments.
(ii) Funds cannot be loaned to unrelated third parties.
(iii)Real-estate purchases must still meet local eligibility criteria.
For smaller firms, understanding these compliance boundaries is essential to fully benefit from the new flexibility.
Q: Can my company reinvest profits in China without first repatriating them?
Yes. If profits are legally earned and verified, they can be credited directly to the investee’s capital account for reinvestment.
Q:Do I still need audited financial statements for cross-border loans?
No, not at signing. Banks will review financial soundness later through post-transaction risk assessment.
Q: Can foreigners buy property more easily now?
Yes, the process is simpler. Buyers can settle FX at the contract stage, but eligibility rules remain unchanged.
Q: How will compliance be managed?
Banks will conduct ongoing, risk-based monitoring instead of blanket pre-approvals. SAFE may inspect or penalize violations after the fact.
🔵✔Update internal procedures to use the no-registration reinvestment route.
🔵✔Adjust funding plans to utilize the USD 10–20 million foreign-debt windows.
🔵✔Align treasury policies with the revised negative list and define low-risk investment categories.
🔵✔Build a clear documentation trail for all capital transactions to ease bank post-checks.
🔵✔For property-related deals, plan FX settlement directly upon signing and schedule follow-up filings promptly.
SAFE has officially repealed the 2022 pilot circular (SAFE [2022] No. 16) and consolidated earlier trial policies into a unified national framework. This integration eliminates the patchwork effect of regional pilots, ensuring that all provinces and cities follow a consistent regulatory baseline. Going forward, the reforms are expected to:
Support RMB internationalization by increasing confidence in capital flow predictability.
Encourage digital regulatory tools, allowing real-time tracking of cross-border funds.
Advance capital-account liberalization in a controlled, step-by-step manner.
This marks another step in China’s long-term effort to build a modern, transparent, and resilient financial system compatible with global standards.
China’s 2025 FX reforms redefine the rules of engagement for cross-border investment and financing. They reflect a mature, pragmatic approach: openness balanced with accountability. For global investors, this is a strong signal that China remains committed to integrating with international markets. But to truly benefit, companies must pair agility with discipline investing responsibly, documenting accurately, and maintaining open communication with banks and regulators. In the words of many policy observers: China is no longer just opening the door, it is redesigning the hallway to make movement smoother for those who play by the rules.
