During much of 2016, China’s State Administration of Foreign Exchange (国家外汇管理局) (“SAFE”), the ministerial level agency tasked with regulating foreign exchange matters, has informally changed its policies to restrict the ability of companies based in the People’s Republic of China (the “PRC” or “China”) to convert Renminbi into foreign currency for the purpose of making offshore direct investments (“ODI”). These policy changes have taken place as China’s economic growth rates decline and China experiences a weakening of its currency and a decline in its foreign exchange reserves. This regulation watch provides background on China’s foreign exchange controls, an overview of China’s written rules for ODI, and our “best guess” at SAFE’s recent policy changes relating to ODI procedures based upon our contacts with various market participants.
