News & Insights

Draft Notice on the Use of Offshore Renminbi in Foreign Direct Investment Projects

On 22 August 2011, the Ministry of Commerce issued for comment the Notice concerning DirectInvestment with Offshore Renminbi (Consultation Draft) (商务部关于跨境人民币直接投资有关问题的通知(征求意见稿 )). Comments were requested by 31 August 2011. This draft Notice does not currently have the force of law.

Scope of Use

The draft notice sets out a method for using lawfully obtained offshore RMB for foreign direct investment in the PRC. The draft notice would allow a foreign investor to use such funds to make capital contribution to foreign investment enterprises or engage in other direct investment transactions. The notice does not apply to RMB held inside of China for which separate regulations shall apply (Please see our Legal Update of July 2011).

For the purpose of the notice, lawfully obtained offshore RMB is deemed to include RMB obtained through cross border trade settlement, offshore yuan bond or share issuance, as well as RMB that has been remitted from China as dividends, share transfer proceeds, capital reductions, liquidation proceeds and early returns on investment.

The RMB used in such direct investment transaction may not be used for the purpose of acquiring securities or financial derivative products, making entrusted loans or settling foreign or domestic debt. During the investment application process, a specific pledge will be required that the funds will not be used for such purposes. The use of these RMB funds will be specifically reviewed during the enterprise's annual inspection.

Application Requirements

Investments using offshore RMB are subject to the general regulatory structure applicable to foreign investment in China, including compliance with the Catalogue for Guiding Foreign Investment, the National Security regulations and the Antimonopoly regulations.

In addition to the standard application documents required for a foreign investment project, several documents specific to the use of offshore RMB shall be required, including a statement regarding the source of RMB with supporting evidence, an explanation of the use of RMB funds and an undertaking that the funds will not be used for the prohibited purposes cited above.

The general delegation of approval authority applicable to foreign investment projects is applicable to foreign direct investment using RMB, however special reporting is required to MOFCOM under any of the following circumstances:

(1) the amount invested is equal to or exceeds RMB¥300 million;

(2) the relevant business involves financial guarantees, financial leasing, small loans or auctioning;

(3) the FIE is an investment holding company, a venture capital enterprise or private equity enterprise;

(4) the entity is in an industry sector regulated by the State at a macro-level, including the cement, iron and steel, electrolysed aluminium and shipbuilding industries.

In such case, the local authorities must submit their approval review to MOFCOM on a specified form. MOFCOM is required to respond to such report within five (5) working days and to confirm whether the approval process should proceed.


This notice if confirmed and supported by further implementing regulations will be an important step in the internationalization of the RMB and will provide needed guidance on the use of RMB for investment in China. With the RMB's continued appreciation, RMB denominated investments should be of increasing interest to investors.

Key Contacts

Edwarde Webre

Consultant | Corporate Commercial

Email or call +852 2825 9730

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