Ever since China began opening up to the outside world, the right of foreign-invested enterprises ("FIEs") to make equity investments within China using capital contributions (i.e., registered capital or a capital increase) has been a privilege rather than a right: the unqualified right to re-invest was reserved for certain specific investment-type FIEs.

However, more recently there has been renewed momentum to relax these restrictions. On 25 October 2019, the State Administration of Foreign Exchange published new rules marking a further relaxation of China's foreign exchange controls.

In this note, we will examine the implications of this significant and eagerly-awaited change that effectively opens up the domestic M&A market to all FIEs, as well as the impact that this may have on other aspects of the Chinese foreign exchange control regime.

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