On July 7, 2025, the National Development and Reform Commission (NDRC) of China, jointly with other 6 national ministries, issued the Notice on Implementing Several Measures for Encouraging Foreign-Funded Enterprises to Make Domestic Reinvestment (hereinafter referred to as “the Notice”).

The Notice outlines the scope and several favorable measures that the foreign-funded enterprises shall have if they re-invest in China, together with the regulators that shall further ensure the implementation of corresponding measures. The “reinvestment” activities that apply to the specific favorable measures in the Notice are defined as: the conduct that foreign-funded enterprises formed according to the law in the territory of China use undistributed profits, or overseas investors use profits in domestic and foreign currencies legally obtained in the territory to invest in newly formed enterprises in China, increase capital in existing enterprises, or acquire shares, equity, property rights or other similar interests in enterprises in China, and to invest in projects in China.

Measures that are offered to the foreign-funded enterprises for their reinvestment include:

-   Adopt flexible measures such as long-term leasing, lease-to-own, and flexible-term transfer of industrial land to reduce initial land costs.

-   For wholly foreign-owned enterprises that newly establish legal entities within China, when they apply for industry access permits that their parent companies have already obtained, industry authorities may optimize and simplify the application process and shorten the processing time in accordance with the law if the basic conditions are met.  

-   Projects invested in by reinvestment enterprises within China that are listed in the Catalogue of Industries for Encouraging Foreign Investment (currently effective version is 2022, and a draft for 2024 version was issued to call for public comments, read more at: previous news) are eligible for relevant support policies on imported equipment.

-   Reinvestment funds shall have more simplified and efficient foreign exchange management processes and services.

Supportive measures that the Notice required for relevant regulators and authorities include:

-  Local governments and competent authorities should, based on actual conditions, establish a database of domestic reinvestment projects of foreign-funded enterprises, provide good project services, and support qualified enterprises with relevant policies in accordance with the law.

-  Relevant tax support policies should be implemented and enforced for corresponding enterprises in accordance with the law.

-  All types of financial institutions are encouraged to innovate products and services under the premise of compliance with laws and regulations and controllable risks, to provide financial services and support for domestic reinvestment of foreign-invested enterprises.

-  Information sharing among governmental departments regarding domestic reinvestment of foreign-funded enterprises should be strengthened to facilitate enterprises' acquisition and acknowledge of relevant supportive/favorable policies.

For foreign stakeholders, it is worth noting that the Notice is a further action of the country to attract and retain foreign investments, as several other relevant policies/measures were issued in 2025 alone, which include:

-  On February 19, the General Office of the State Council issued the Action Plan for Attracting Foreign Investment in 2025, proposing 20 specific tasks from four aspects. It particularly mentioned increasing support for foreign-funded enterprises' reinvestment within China. Research and formulation of policies and measures to encourage foreign-funded enterprises' reinvestment within China will be carried out to promote the use of profits earned by foreign-funded enterprises in China for reinvestment.

-  On June 18, the State Administration of Foreign Exchange issued the draft of the Notice on Deepening the Reform of Cross-border Investment and Financing Foreign Exchange Management (Draft for Comment) to call for public comments. It includes nine specific policies in three aspects, among which it suggests that the registration for reinvestment within China by foreign-funded enterprises shall be abolished.

-  On June 30, the Ministry of Finance, the State Taxation Administration, and the Ministry of Commerce jointly issued the Announcement on Tax Credit Policy for the Direct Investment Made by Overseas Investors with Distributed Profits. It clarifies that during the period from January 1, 2025 to December 31, 2028, foreign investors who use profits distributed by Chinese resident enterprises for direct investment within China and meet certain conditions can enjoy tax credits.

The policies and measures are worth diving into for MNCs that have investments in China, especially those intends reinvest in China. Considering supportive measures and actions may come from different levels of government (national level to district level), so it is suggested that relevant MNCs consult all possible levels to have a full view and landscape on what follow-up actions shall fit their best interest.

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