Mr. Zhou, who works in international trade, set up a subsidiary in Vietnam last year. He transferred the funds directly from his domestic account without filing any required paperwork. This year, upon hearing that regulatory policies have changed, he’s feeling increasingly anxious: Is this considered a violation? Does he need to retroactively file the necessary paperwork?

What made him even more anxious was that his friend mentioned that, effective July 1, 2026, the “State Council Regulations on Foreign Investment” (Decree No. 837) would officially take effect, elevating ODI regulation from departmental rules to State Council administrative regulations, and multiplying the cost of noncompliance several times over.

This article clearly explains the scope of application, application process, and key restrictions for the 2026 ODI filing requirements. If you’re planning to go global—whether to set up a company, acquire equity, or build a factory—we recommend reading this first.

01

What is an ODI filing

ODI (Outbound Direct Investment) refers to domestic investors acquiring ownership, control, or management rights over enterprises or assets overseas by contributing assets or equity, or by providing financing or guarantees. Simply put, when domestic companies establish companies, acquire equity interests, build factories, or invest in projects overseas, they generally do so through ODI.

"Regulations of the State Council on Foreign Investment," effective July 1, 2026 (Decree No. 837, adopted by the State Council Executive Meeting on April 17, 2026, and signed on May 5) for the first time brings ODI regulation under the umbrella of State Council administrative regulations, elevating the requirements for approval and filing, information reporting, and capital registration—which were previously scattered across three sets of rules issued by the Ministry of Commerce, the National Development and Reform Commission, and the State Administration of Foreign Exchange—to the level of a legal system.

Note: Investments in Hong Kong, Macao, and Taiwan are also governed by these regulations. Therefore, many business owners mistakenly believe that ’setting up a company in Hong Kong does not require filing”—this is a misconception. If a Hong Kong company is acquired through outward direct investment (ODI) by a mainland enterprise, it must also file for ODI.

02

The Three Main Regulatory Priorities Remain Unchanged

Order No. 837 did not abolish the original procedures but rather “elevated” them to a higher level and brought them under a unified framework. In practice, the process continues to follow three separate channels: the commerce authorities (Decree No. 3 of the Ministry of Commerce) are responsible for the approval/filing of overseas investment enterprises and the issuance of the “Enterprise Overseas Investment Certificate”; the development and reform authorities (Decree No. 11 of the National Development and Reform Commission) are responsible for the approval/filing of overseas investment projects; and the foreign exchange authorities are responsible for foreign exchange registration for overseas direct investment, the remittance of funds, and the registration of existing equity interests.

In practice, the process typically goes as follows: First, obtain the “Project Filing Notice” from the National Development and Reform Commission; next, obtain the “Overseas Investment Certificate” from the Ministry of Commerce; and finally, complete foreign exchange registration at a bank and remit the funds. Only when all three certificates are in hand can funds be legally transferred overseas, and only then will there be a legitimate channel for repatriating subsequent profits.

Common bottlenecks: Industries involving sensitive countries/regions or sensitive sectors (such as the defense industry, cross-border data, and core technologies) require approval rather than filing, which involves a lengthy process and extensive documentation; non-sensitive categories generally follow the filing process and can be completed within a few weeks provided all required materials are submitted.

If you’re facing a similar situation—planning to set up a company overseas or acquire equity, but unsure whether to apply for an ODI or which route would be the most hassle-free—feel free to scan the QR code to add Qicaiying’s online customer service (WeChat/Phone: 18620388671). We’ll help you sort out your investment structure. Feel free to scan the QR code to contact Qicaiying’s online customer service (WeChat/Phone: 18620388671), and we’ll help you sort out this entire process from start to finish.

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03

What Changes Did Order No. 837 Bring?

First, the scope of applicable entities has been expanded. The original ODI regulations only covered domestic enterprises, and there were essentially no compliance channels for overseas investment by natural persons; Decree No. 837 clarifies that the term ’investor” includes enterprises, other organizations, and resident individuals within China, thereby paving the way for subsequent detailed rules on ODI by individuals (specific measures for individuals will be formulated by the State Council’s investment and commerce authorities; as these have not yet been implemented, please do not misinterpret this to mean that “individuals can now freely make such investments”).

Second, the penalties for violations have been significantly increased. Any entity that fails to complete the required approval and filing procedures, or submits false materials to fraudulently obtain filing approval, shall be ordered to rectify the violation, have its illegal gains confiscated, and be fined 1‰ to 5‰ of the investment amount; Those who refuse to rectify the violation will be ordered to suspend investment, have their assets disposed of, and be fined 5‰ to 10‰ of the investment amount; the directly responsible persons will be fined 20,000 to 50,000 yuan, and the competent authority may refuse to accept their applications for three years.

Third, strengthen security reviews and full-chain oversight. Overseas investments that affect or may affect national security must undergo security reviews; investors must establish sound compliance, internal control, and workplace safety systems overseas, and those who violate these requirements may be prohibited from engaging in overseas investment activities for 1 to 3 years.

04

In which situations is it mandatory to apply?

Domestic enterprises establishing new overseas subsidiaries or joint ventures; acquiring equity or assets in overseas enterprises; setting up overseas branches or project companies; or using domestic assets or equity interests to provide financing or guarantees for overseas investments—all of these constitute ODI and, in principle, require filing or approval.

When reinvesting in a third country through a Hong Kong company (such as a Hong Kong company setting up a factory in Vietnam), if the Hong Kong company itself is owned by a mainland enterprise, the establishment process requires ODI approval, and subsequent reinvestments must also be handled in accordance with relevant regulations. For many cross-border sellers, the “Hong Kong company—overseas warehouse—local entity” supply chain begins with ODI approval.

Conversely, transactions under pure trade (foreign exchange proceeds from exports of goods), the repatriation of funds raised through overseas listings, and foreign exchange purchases by individuals for private purposes such as travel or study abroad are not subject to ODI approval or filing requirements and may be processed through normal foreign trade or foreign exchange channels. The distinguishing factor is ’whether equity interests in an overseas enterprise are acquired.”

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05

Three Practical Tips to Avoid Pitfalls

First, verify the industry and destination. Before investing, confirm whether the project involves a “sensitive” category; projects in sensitive categories require approval and involve a high degree of uncertainty. For non-sensitive categories, prepare the necessary documents as early as possible to file for recordation—do not wait until the funds have already left the country to submit them later, as the compliance costs and risks associated with retroactive processing are significantly higher.

Second, the materials must be authentic and logically consistent. The statement of investment authenticity, the financial reports of domestic enterprises, the feasibility studies for overseas projects, and proof of funding sources must corroborate one another; fabricating trade backgrounds or using shell companies to channel funds are the most common reasons for applications to be rejected and for negative records to be created.

Third, ensure you follow through with the necessary follow-up actions. ODI isn’t just a matter of ’getting the permit and calling it a day”: You must register the outstanding equity interests in foreign direct investments annually, file reports for any material changes, and remit profits through compliant channels. Treat this as an ongoing compliance matter, not a one-time process.

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