On June 11, 2012, the State Administration of Foreign Exchange (“SAFE”) issued the Circular on Issues Concerning Foreign Exchange Controls in Encouraging and Guiding the Healthy Development of Private Investment (Hui Fa [2012] No. 33) (the “Circular”), which involves critical changes in foreign exchange controls for outbound investment. The Circular simplifies the procedure of, and eliminates some approval requirements on inward and outward remittance of funds for outbound investment projects.

The Circular also permits Chinese enterprises to use foreign currency loans acquired from domestic banks to finance their outbound investment projects.

Further, the Circular allows Chinese individuals to provide a guarantee and/or security to support domestic enterprises’ outbound investment projects, provided a domestic enterprise also provides a guarantee and/or security for the same outbound project. The Circular clarifies that no standalone guarantee or security provided by Chinese individuals in support of such projects is permitted.

For the full text of the Circular, please visit the following Chinese language link: http://www.safe.gov.cn/model_safe/laws/law_detail.jsp?ID=80404000000000000,33&id=4