Moving Money Into and Out of China
Capital contributions, profit repatriation, reinvestment and foreign-exchange compliance
Capital contributions, profit repatriation, reinvestment and foreign-exchange compliance
Key takeaways
- Cross-border funds must follow a genuine transaction path supported by consistent corporate, tax, banking and foreign-exchange records.
- SAFE Circular 43 simplified several procedures from September 2025, but facilitation does not remove bank authenticity and risk review.
- Profit distributions, capital reductions, equity transfers and liquidation proceeds follow different legal and documentary routes.
1. Current account and capital account
Current-account payments arise from recurring trade, services, income and transfer transactions. Capital-account transactions include direct investment, external borrowing, securities investment and changes to investment capital. The classification matters because the account, registration, tax and supporting-document requirements differ.
2. Preliminary expenses and capital contributions
SAFE Circular 43 allows an overseas investor that needs to remit preliminary expenses before establishing a foreign-invested enterprise to open a preliminary-expenses account at a bank without first completing preliminary-expenses basic-information registration. The bank still reviews the application and intended use. Unused funds should be handled through the permitted route if the establishment does not proceed.
After establishment, shareholder capital should be remitted through the designated direct-investment account and recorded consistently with the articles, registration and bank information. Capital funds and converted RMB remain subject to genuine and self-use principles and the applicable negative list for uses of capital-account income.
3. Reinvestment and external financing
Circular 43 simplified qualifying domestic reinvestment using foreign-exchange capital or converted RMB and expanded cross-border financing facilitation for eligible high-tech, specialised and technology-based enterprises. Eligibility and quota should be confirmed with the handling bank before signing financing documents.
4. Profit repatriation
A China company may distribute lawfully available after-tax profits after covering losses and making required allocations. The company should approve the distribution, complete tax withholding or treaty procedures, and provide the bank with authentic supporting documents. A treaty rate depends on the facts and should not be assumed merely because the shareholder is incorporated in a treaty jurisdiction.
5. Capital reduction, equity transfer and liquidation
A capital reduction requires the corporate resolutions, creditor-protection process, registration and tax treatment required by law. Banks and foreign-exchange systems then process the cross-border payment based on the completed transaction and supporting records. Equity-transfer proceeds and liquidation distributions have their own tax, registration and bank requirements; they should not be treated as ordinary dividends.
6. Managing exchange-rate risk
Forward exchange, swaps and options may help a company manage genuine currency exposure. The People’s Bank of China reduced the foreign-exchange risk reserve ratio for forward foreign-exchange sales from 20% to 0 with effect from 2 March 2026. This may reduce market friction, but it does not make a hedge suitable for every company. A documented risk-neutral policy should link hedging to underlying exposures rather than speculation.
Before you act
- Classify the payment before choosing the account and documents.
- Align corporate approvals, contracts, invoices, tax filings and bank information.
- Confirm treaty eligibility before calculating a net dividend.
- Plan creditor protection and tax before a capital reduction or liquidation.
- Adopt a written foreign-exchange risk policy tied to genuine exposures.
How we can help
BizLawyerChina can assist with market-entry screening, investment structure, company documents, regulatory coordination and cross-border funding planning. Early review is usually most valuable before a term sheet, deposit or incorporation commitment becomes binding.
Principal official sources
- SAFE Circular 43 on Deepening Reform of Cross-border Investment and Financing FX Administration
- Foreign Investment Law of the People's Republic of China
- PBOC announcement on the forward FX sales risk reserve ratio