On November 1, 2024, the Ministry of Commerce, the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the State Taxation Administration, the State Administration for Market Regulation, and the State Administration of Foreign Exchange jointly issued the Measures for the Administration of Strategic Investment in Listed Companies by Foreign Investors (the “New Measures”), which will take effect on December 2, 2024. The New Measures replace the Measures for the Administration of Strategic Investment in Listed Companies by Foreign Investors issued on December 31, 2005 and amended on October 25, 2015 (the “Old Measures”).
Compared to the Old Measures, the New Measures lower the thresholds and relax requirements for foreign strategic investments, aiming to further expand channel for foreign investment in China’s securities market, to attract more foreign capital, and to encourage foreign investors to engage in long-term and value-based investments.
Major Changes in the New Measures
The New Measures introduce the following changes to further encourage foreign strategic investments as compared to the Old Measures:
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Old Measures
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New Measures
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Example
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Foreign Investors
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Foreign legal entities or other organizations |
Foreign natural persons, enterprises, or other organizations |
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Asset Requirements
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The foreign investor or its parent company shall own at least USD $100 million in total overseas actual assets or have at least USD $500 million in total overseas actual assets under management |
The foreign investor shall own at least USD $50 million in total actual assets or have at least USD $300 million in total actual assets under management; For a foreign investor to become the controlling shareholder of a listed company, it shall own at least USD $100 million in total actual assets or have at least USD $500 million in total actual assets under management |
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Lock-up Period
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Three years |
Twelve months |
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Strategic Investment Methods
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Private placement, transfer by agreement |
Private placement (including subscription of new shares as an investor pre-determined by the board of directors of the listed company or as an investor determined through competitive bidding), transfer by agreement, and tender offer |
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Shareholding Ratio Requirements
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No less than 10% |
The shareholding ratio requirement for strategic investment via private placement is removed; For strategic investment via transfer by agreement or tender offer, the shareholding ratio shall be no less than 5% |
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Addition of Cross-border Equity Swap as a Payment Option for Foreign Strategic Investments
The New Measures permit a foreign investor to utilize the equity held by it in an overseas company or new shares issued by it as payment for strategic investments in listed companies. Specifically, for strategic investments via private placements or tender offers, shares of privately held foreign company are permitted as payment, whereas shares of listed foreign company are required for strategic investments via transfer by agreement.
Simplification of the Process for Foreign Strategic Investment
Aligned with the Foreign Investment Law, the New Measures remove the prior approval requirement from the Ministry of Commerce stipulated in the Old Measures, as well as the requirement to open a foreign exchange account and complete the strategic investment within a specific period following the Ministry of Commerce’s preliminary approval. The New Measures now mandate that foreign investors or listed companies shall submit investment information to the relevant commerce department after completing the strategic investment, and when the change in the shareholding ratio of the foreign investor accumulatively exceeds 5% or there is any change in the controlling position or relative controlling position of the foreign investors. Moreover, foreign investors using transfer by agreement, private placement, or tender offer for strategic investments now follow a process similar to that for domestic investors.
The New Measures clarify that foreign investors and listed companies shall engage advisors (i.e., financial advisory firms, sponsors, or law firms) to serve the process. These advisors shall be registered in China and in compliance with the Securities Law of the People’s Republic of China. These advisors shall conduct due diligence on whether the foreign investors comply with the New Measures, whether the strategic investment affects or may affect national security, whether the negative list for foreign investment access is involved, and issue due diligent reports accordingly.
