On July 1, 2026, the “Regulations of the State Council on Foreign Investment” (Order No. 837) will officially take effect. For cross-border e-commerce sellers and business owners expanding overseas, this is not a policy that ”has little to do with them.”

Whether you’re a cross-border seller with a Hong Kong-based company, a business owner with a nominee arrangement, or a team planning to raise capital and go public, these new regulations are worth a careful review.

In today’s article, we’ll use the most straightforward approach to clarify three things:

1. What is Order No. 837?
2. Why is this time different?
3. What exactly should companies do now?

What exactly does Order No. 837 regulate?

Order No. 837 governs: foreign investments made by investors within China.

To put it simply, any enterprise, organization, or individual resident within China that, through any means, controls an overseas company, overseas assets, overseas equity, or overseas business interests may fall under the scope of ODI regulation. Regulators look beyond whether ”money has been transferred out of domestic banks”; they also examine who the actual investor is, who controls the overseas company, who receives the proceeds, and whether there are any nominee arrangements, circumvention tactics, or multi-tiered structural arrangements.

There are a few common scenarios that require special attention:

1. A domestic company establishes a subsidiary in Hong Kong or overseas

Whether companies in Hong Kong, Singapore, the United States, or Europe are used as holding platforms, payment recipients, brand entities, or overseas operating entities, they essentially represent domestic entities acquiring equity or control in foreign companies. Therefore, it is necessary to assess matters such as ODI filing, business registration, NDRC filing, and foreign exchange registration.

2. Cross-border sellers use Hong Kong companies to receive payments.

If a Hong Kong company is effectively controlled by a mainland enterprise or individual and performs functions such as receiving payments, holding shares, operating the business, and retaining profits, it can no longer be simply explained away as ”merely receiving payments.”

3. Direct individual ownership of a Hong Kong company or an overseas company

Decree No. 837 explicitly includes ”individual residents” within the scope of investors. The understanding that ”ODI applies only to enterprises, while individual overseas shareholdings fall into a gray area” needs to be reevaluated.

4. Reinvestment, Transfer, and Restructuring of Overseas Assets

ODI does not occur only when an overseas company is first established. Subsequent capital increases, mergers and acquisitions, sales, restructurings, and asset transfers involving an overseas company may also trigger new regulatory assessments.

Why is it different this time?

ODI filing is not a new requirement. In the past, overseas investment by enterprises was primarily governed by regulations issued by agencies such as the National Development and Reform Commission, the Ministry of Commerce, and the State Administration of Foreign Exchange. What sets Order No. 837 apart is that it is an administrative regulation issued at the State Council level. As a result, the regulation of outbound investment has transitioned from a relatively fragmented system of departmental rules to a more systematic, higher-level, and unified regulatory framework.

This change can be summarized by three key terms: elevation of administrative level, expansion of the scope of entities, and coordinated oversight.

1.Upgrading of the Regulatory Level(math.) genusODI Is No Longer Just About ”Filing a Record”

In the past, many companies” understanding of ODI was often limited to ”We need to remit funds, so we’ll file a record” or ”The bank needs documentation, so we’ll submit an ODI application.” However, following the issuance of Order No. 837, ODI is no longer merely a standalone filing procedure. It will now be integrated with regulations governing foreign exchange, taxation, banking, data, export controls, national security reviews, antitrust, and state-owned asset supervision—no longer is it a matter of ”one department overseeing one segment,” but rather ”multiple departments overseeing the entire chain.”

Don’t think of the ODI as just a single, isolated ”certificate.” It serves as the compliance foundation for your global expansion strategy. If this foundation isn’t solid, subsequent processes—such as opening bank accounts, transferring funds overseas, repatriating profits, securing financing and going public, and transferring equity—may all hit roadblocks.

2,Individual residents have been included(math.) genusIndividuals Can No Longer Rely on Legal Loopholes for Overseas Stock Holdings

In the past, many business owners would hold Hong Kong companies directly in their personal capacity or have relatives, friends, or employees act as nominees for overseas entities. However, Order No. 837 explicitly includes ”resident individuals” within the scope of investors, meaning that individual foreign investment is no longer a ”blind spot” outside the regulatory framework.

We recommend that you conduct a self-inspection of the following arrangements as soon as possible:

• Individuals who directly own companies in Hong Kong, the British Virgin Islands, the Cayman Islands, Singapore, or the United States;
• Having a spouse, parent, employee, or friend act as a nominee for an overseas company;
• The overseas company is actually controlled by a domestic owner, but the shares are registered in someone else’s name;
• Individuals use offshore companies to retain profits from cross-border business over the long term;
• Mixing personal and business accounts;
• There are plans to repatriate overseas profits to China in the future.

The specific administrative measures governing individual overseas investments still need to be further clarified by the competent authorities. However, this does not mean we can continue to adopt a wait-and-see approach. The real danger lies in discovering—only when it comes time for future financing, IPOs, repatriation of profits, opening bank accounts, or tax audits—that the initial structure has left behind a series of unresolved issues.

3,Hong Kong, Macao, and Taiwan should no longer be viewed as ”exceptional regions”

In the past, many cross-border businesses believed that Hong Kong companies served merely as a transit layer and that since it was convenient to receive U.S. dollars through Hong Kong accounts, there should be no major issues. Article 32 of Order No. 837 explicitly states that the management of investments made by investors in the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and the Taiwan region shall be carried out in accordance with these provisions. This does not mean that all Hong Kong companies cannot be used; rather, it means that Hong Kong companies can no longer be simply regarded as a “safe haven” outside the scope of ODI regulation.

In the future, when assessing the risks associated with a Hong Kong company, one must consider its actual function within the corporate structure:

1. Is it a shell account, or an actual business entity?
2. Do you own any equity, trademarks, brands, stores, or intellectual property?
3. Should profits be retained?
4. Is it actually controlled by a domestic enterprise or a resident individual?
5. Can you explain the source of funds, the allocation of profits, and the nature of the business?

The question is no longer ”Can a Hong Kong company be used?” but rather whether your Hong Kong company can be interpreted as a compliant, genuine, and necessary business arrangement.

These 4 Factors Have the Greatest Impact on Cross-Border Businesses

1. The notion that a ”Hong Kong company” is merely a "receiving entity" is no longer sufficient.

Having a Hong Kong company does not necessarily mean you are in violation of regulations, but a Hong Kong company without a compliant explanation will certainly become increasingly difficult to justify in the future.

2. Risks increase significantly when shares are held by individuals, held on behalf of relatives, or held on behalf of employees.

The boss personally owns a Hong Kong company, the spouse owns a Singapore company, the parents hold a BVI company on his behalf, and employees hold the overseas warehouse entity on his behalf. While these arrangements may seem flexible in the short term, they can easily lead to problems in the long run.

Once questions are raised in the future, the key issues will be: Who provided the funds? Who owns the equity? Who actually controls the company? Who receives the profits? Are there any nominee holding agreements? Are there proofs of tax payment? Are there any ODI or foreign exchange registration documents?

Nominee holding is not a compliant solution.. It often turns apparent compliance issues into more complex equity disputes, tax risks, and due diligence risks.

3. ODI affects the outflow of capital, the repatriation of profits, and financing and IPOs

ODI is not something you ”only need when it’s time to transfer funds.” When funds are transferred overseas, banks typically review documents such as ODI filings, commercial filings, National Development and Reform Commission (NDRC) filings, and foreign exchange registration.

When profits are repatriated—including dividends, service fees, royalty payments, and proceeds from the transfer of equity—authorities will also inquire about the nature of the funds, the source of the profits, the ownership structure of the overseas companies, and whether the original investment was lawful.

When raising capital for an IPO, investors and underwriters will also examine the offshore structure, nominee arrangements, tax compliance, capital flows, and the chain of ownership.

4. The costs of noncompliance will be clearer, and there will be less room for a ”do first, fix later” approach.

Decree No. 837 clarifies the liability provisions for non-compliant foreign investment. Failure to complete the required approval or filing procedures, or submitting false materials or concealing true information when applying for approval or filing, may result in consequences such as being ordered to rectify the violation, confiscation of illegal gains, and fines; those who refuse to rectify the violation may also be ordered to cease investment activities or dispose of shares or assets within a specified time limit.

Historical investment activities have already taken place, overseas assets have been accumulated, and funds have changed hands multiple times; therefore, rectifying the situation going forward is not simply a matter of filling out forms, but rather requires a thorough re-examination of the entire chain of events.

Which companies and individuals should be conducting self-inspections right now?

1,Cross-border sellers who already have a Hong Kong-based or overseas company

In particular, Hong Kong companies are used for platform payments, linking payment tools, holding overseas stores, brands, and trademarks, accumulating long-term profits, which are either held directly by the owner or reinvested in other overseas entities.

Companies of this type are most prone to making the following misjudgment: ”I’m just doing this for the convenience of receiving payments; it’s not an investment.” However, if a Hong Kong company is actually controlled by a mainland entity and serves as the entity responsible for business operations, funds, profits, and assets, this cannot be explained solely by ”convenience in receiving payments.”

2,Companies with overseas warehouses, overseas teams, and overseas assets

This includes establishing overseas warehousing companies abroad, leasing or purchasing warehouses, hiring local staff, owning vehicles, equipment, and inventory, setting up local delivery companies, and forming joint ventures with local partners.

Genuine business operations address substantive commercial issues, while ODI focuses on whether a domestic entity has made foreign investments. The existence of actual business operations does not automatically exempt an entity from ODI requirements.

3,Business owners who have overseas companies registered in their own or a relative’s name

Whether the business owner holds shares directly or through a spouse, parent, employee, or overseas associate, such arrangements may pose risks related to ownership, taxation, and due diligence for financing purposes. It is recommended to review these arrangements as soon as possible.

4,Companies currently setting up a red chip structure or a VIE structure, or preparing to raise capital through an IPO

If a company plans to raise capital, go public, or bring in investors in the future, it cannot set up an offshore structure haphazardly. It is essential to carefully examine whether domestic natural persons directly or indirectly control the offshore company, whether registration under Circular No. 37 has been completed, whether there are any unregistered ODI nodes, and whether the offshore entities responsible for financing, shareholding, and operations are clearly aligned.

Special Note: Registration under Document No. 37 cannot simply be equated with ODI compliance. Document No. 37 primarily addresses foreign exchange registration issues, whereas ODI also involves the regulatory frameworks of multiple departments, including the National Development and Reform Commission, the Ministry of Commerce, and the State Administration of Foreign Exchange; the two are not interchangeable.

What exactly should we do now?

Don’t panic just yet. Order No. 837 isn’t intended to prevent companies from expanding overseas, nor does it mean that existing overseas structures can no longer be used. What you really need to do is:Investigate thoroughly before making a judgment; examine the architecture before deciding on a path.

1,Let's start by creating a diagram of the domestic and international architecture.

Don’t start by asking, ”Do I need ODI filing?” First, identify which companies are based in mainland China, which are overseas, who holds shares in the Hong Kong company, who actually controls the overseas companies, whether there are any individual shareholders or nominee holdings, what business operations the overseas companies undertake, where the funds come from, where profits are retained, whether there are any overseas reinvestments, and whether you plan to raise capital, go public, or repatriate profits in the future. Only by getting a clear picture of the situation can you identify where the risks lie.

2,Determining Whether ODI-Related Obligations Have Been Triggered

Focus on the following key dimensions:

• Whether domestic enterprises or individual residents have established or control overseas companies;
• Whether ownership of equity interests, assets, or operational management rights in foreign entities has been acquired;
• Is there a structure involving entities from Hong Kong, Macau, and Taiwan?;
• Does the investment involve sensitive industries, sensitive countries, or the cross-border transfer of technology, data, or intellectual property?

If any of these situations apply, it is not recommended to base your judgment on statements such as ”the money didn’t leave the country,” ”it’s just a receipt,” or ”everyone does it.”

3,Design processing paths based on different scenarios

🔷 Haven't set up an overseas company yet:Design the structure first, then register the company. A more prudent approach is to clarify the business objectives, design the equity structure, determine the ODI filing requirements, and simultaneously plan for foreign exchange registration, tax filing, and opening a bank account—and only then proceed with the establishment of the overseas entity.

🔷 Already have an overseas company but no ODI:Don’t rush to file a supplementary registration, and don’t rush to deregister either. First, conduct a compliance review to thoroughly understand the company’s establishment background, sources of funding, and actual business operations, and then decide on a course of action for rectification.

🔷 An individual or a relative owns an overseas company:Focus on verifying whether the equity structure aligns with actual control, whether the sources of funds are transparent, whether registration under Document No. 37 has been completed, and whether these factors will affect future financing, an IPO, or the repatriation of profits.

It’s not that we can’t go global—it’s that we can no longer ”go global blindly.”

Decree No. 837 is not intended to put the brakes on companies expanding overseas. Companies can expand overseas, but they must do so within the rules; capital can flow overseas, but it must be transparent, controllable, and able to return.

Whether it’s the ownership structure of Hong Kong companies, nominee arrangements, capital flows, profit attribution, or due diligence for financing, we can no longer rely on luck.

Compliance isn't meant to scare people; rather, it ensures that a company's future cash flow, profits, equity, taxes, and financing all run smoothly.

If you already have a Hong Kong company, an overseas company, or an overseas warehouse—or if you’re in the process of setting up your global expansion framework—the most important thing to do right now is not to panic or sit on the sidelines, but to conduct an ODI compliance review.

The sooner you act, the more options you’ll have. The longer you wait, the higher the cost will be.

Expanding overseas isn't the problem; expanding overseas without a clear strategy is the problem.