The foreign exchange authorities introduced 12 new measures to facilitate China cross-border trade and investment.
Huifa  No. 28 was issued by the State Administration of Foreign Exchange (SAFE) in October 2019 and is referred to as SAFE Circular 28. Among the measures in SAFE Circular 28 are provisions to remove restrictions on foreign invested enterprises (FIEs) from using their registered capital for domestic equity investments. The restrictions previously applied when these were not “FIE investment enterprises” (i.e., FIEs with equity investment as a listed activity in their registered scope of business). The change builds on earlier pilot programs and is intended to facilitate the expansion of foreign business and investment in China.
Since 2008, policies governing FIE use of registered capital for domestic equity investment have evolved:
SAFE Circular 28 effectively adopts this treatment and uses substantially similar treatment for FIE non-investment enterprises nationwide.
Implications of SAFE Circular 28 for foreign investors include:
For more information, contact a KPMG tax professional:
David Ling | +1 609 874 4381 | firstname.lastname@example.org
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.