Order of the Ministry of Commerce, China Securities Regulatory Commission , State-owned Assets Supervision and Administration Commission of the State Council, State Administration of Taxation, State Administration for Market Regulation, State Administration of Foreign Exchange No. 3 of 2024 on the Administration of Strategic Investment of Foreign Investors in Listed Companies Order of the Ministry of Commerce of the People’s Republic of China China Securities Regulatory Commission State-owned Assets Supervision and Administration Commission of the State Council State Administration of Taxation State Administration for Market Regulation State Administration of Foreign Exchange No. 3 of 2024

The “Administrative Measures for Strategic Investments by Foreign Investors in Listed Companies” has been reviewed and approved at the 13th ministerial meeting of the current Ministry of Commerce on August 15, 2024, and has been approved by the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Market Regulation, and the State Administration of Foreign Exchange. It is now promulgated and will come into effect on December 2, 2024.

Minister of Commerce Wang Wentao
Chairman of China Securities Regulatory Commission Wu Qing
Director of State-owned Assets Supervision and Administration Commission of the
State Council Zhang Yuzhuo Director of State Administration of Taxation Hu Jinglin
Director of State Administration for Market Regulation Luo Wen
Director of State Administration of Foreign Exchange Zhu Hexin
November 1, 2024

Measures for the Administration of Strategic Investment by Foreign Investors in Listed Companies

Article 1 These Measures are formulated in accordance with the Foreign Investment Law of the People’s Republic of China, the Securities Law of the People’s Republic of China and other laws and regulations in order to promote high-level opening-up, attract and utilize foreign capital with greater efforts, introduce foreign funds and management experience, improve the governance structure of listed companies, guide foreign investors to make strategic investments in listed companies in an orderly and standardized manner, maintain the order of the securities market, and protect the legitimate rights and interests of listed companies and shareholders.

Article 2 These Measures shall apply to the acts of foreign investors acquiring and holding A shares of listed companies in the medium and long term through targeted new share issuance, negotiated transfer, tender offer and other methods prescribed by national laws and regulations (hereinafter referred to as strategic investment).

Article 3 The foreign investors referred to in these Measures refer to foreign natural persons, enterprises or other organizations.

The listed companies referred to in these Measures refer to A-share listed companies.

Article 4 Strategic investment shall comply with the following principles:

(1) abide by national laws and regulations and do not endanger national security and the public interest;

(2) Adhere to the principles of openness, fairness and impartiality, safeguard the legitimate rights and interests of listed companies and their shareholders, accept supervision by the government and the public, apply Chinese laws, and obey Chinese judicial and arbitration jurisdiction;

(3) Carry out medium- and long-term investment, maintain the normal order of the securities market, and refrain from speculation;

(4) Fair competition shall not be hindered, and competition shall not be excluded or restricted.

Article 5 Foreign investors shall not make strategic investments in listed companies involved in investment fields prohibited by the Negative List of Foreign Investment Access; foreign investors’ strategic investments in listed companies involved in investment fields restricted by the Negative List of Foreign Investment Access shall comply with restrictive access special management measures such as equity requirements and senior management requirements stipulated in the Negative List.

Article 6 Foreign investors shall meet the following conditions:

(1) Foreign enterprises or other organizations established and operated in accordance with the law, with sound financial conditions, good credit standing, mature management experience, a sound governance structure and good internal control system, and standardized business practices; foreign natural persons have the corresponding risk identification and risk-taking capabilities;

(2) The total amount of actual assets shall not be less than 50 million U.S. dollars or the total amount of actual assets under management shall not be less than 300 million U.S. dollars; if a foreign investor becomes a controlling shareholder of a listed company, the total amount of actual assets shall not be less than 100 million U.S. dollars or the total amount of actual assets under management shall not be less than 500 million U.S. dollars;

(3) It has not been subject to any criminal penalty at home or abroad or any major penalty imposed by any regulatory authority in the past three years. If the enterprise or other organization has been established for less than three years, the period shall be counted from the date of establishment.

If the total amount of actual assets or the total amount of actual assets under management of a foreign enterprise or other organization does not meet the conditions specified in item (2) of the preceding paragraph, but its wholly-owned investor (referring to a foreign natural person, enterprise or other organization that wholly owns the aforementioned entity) meets the conditions specified in the preceding paragraph, it may make a strategic investment in accordance with these Measures; in this case, the wholly-owned investor shall make a commitment or agree with the foreign enterprise or other organization to jointly assume responsibility for the relevant investment behavior.

Article 7 Where a foreign investor uses its equity in an overseas company or its newly issued shares as a means of payment to make a strategic investment in a listed company, the following conditions shall also be met:

(1) The overseas company is established in accordance with the law, the place of registration has a sound corporate legal system, and the overseas company and its management have not been subject to major penalties by domestic or foreign regulatory authorities in the past three years; if the strategic investment is implemented through transfer by agreement, the overseas company shall be a listed company;

(2) The foreign investor lawfully holds the equity of the overseas company and can transfer it according to law, or the foreign investor lawfully issues additional shares;

(3) Comply with the Securities Law of the People’s Republic of China, the Company Law of the People’s Republic of China and relevant regulations of the State Council, the State Council Securities Regulatory Commission, the stock exchanges and the securities registration and settlement institutions;

(IV) Comply with the relevant provisions of the State on overseas investment management and complete relevant formalities.

Article 8 Where a foreign investor makes a strategic investment, the foreign investor or listed company shall employ a financial advisory institution, a sponsoring institution or a law firm (hereinafter collectively referred to as an intermediary institution) registered in China and in compliance with the provisions of the Securities Law of the People’s Republic of China as a consultant.

Where a strategic investment is implemented through a targeted issuance of new shares by a listed company, the foreign investor shall employ an intermediary institution to conduct due diligence on whether the strategic investment complies with the provisions of Article 6, Article 7 and the second paragraph of Article 10 of these Measures; a listed company shall employ an intermediary institution to conduct due diligence on whether the strategic investment affects or may affect national security, whether it involves the negative list for foreign investment access, and whether it complies with Article 5 of these Measures.

Where a strategic investment is implemented through transfer by agreement or tender offer, the foreign investor shall employ an intermediary institution to conduct due diligence on whether the strategic investment affects or may affect national security, whether it involves the negative list for foreign investment access, and whether it complies with the provisions of Article 5, Article 6, Article 7, and the second paragraph of Article 10 of these Measures.

Article 9 The intermediary institution shall issue a report, express clear professional opinions on each of the above contents and disclose them.

Intermediary institutions should explain in their professional opinions the number of shares and shareholding ratios of listed companies acquired and held by foreign investors and their persons acting in concert, including but not limited to through the methods mentioned in Article 2 and Article 33 of these Measures.

Article 10 A shares of listed companies acquired by foreign investors through strategic investment shall not be transferred within 12 months. If a foreign investor that does not comply with the provisions of Article 6 or Article 7 of these Measures implements strategic investment in violation of regulations by means of false statements, etc., the shares involved shall not be transferred before taking measures to meet the corresponding conditions and within 12 months after meeting the corresponding conditions.

Foreign investors may make irrevocable or unchangeable public commitments upon request from intermediary institutions, listed companies or related parties: if the strategic investment does not comply with the conditions stipulated in Articles 4, 5, 6 and 7 of these Measures, and if the strategic investment is implemented in violation of regulations through false statements, etc., the foreign investors shall not transfer, donate or pledge the shares of the listed company involved, participate in dividends, exercise voting rights on the shares of the listed company involved or influence the voting before and within 12 months after the corresponding conditions are met.

If the Securities Law of the People’s Republic of China, the regulations of the securities regulatory authority of the State Council, and the rules of the stock exchange have requirements for a longer period for the lock-up period of shares, such provisions shall prevail.

Article 11 Where a strategic investment is implemented through a private placement of new shares by a listed company, foreign investors may subscribe for new shares as the issuance targets determined in advance by the board of directors of the listed company, or as the issuance targets determined through bidding.

Article 12 Where a foreign investor subscribes for new shares as an issuer determined in advance by the board of directors of a listed company, the strategic investment shall be handled in accordance with the following procedures:

(1) A listed company signs a private placement contract with a foreign investor;

(ii) The board of directors of the listed company adopts a resolution on the private placement of new shares to foreign investors and discloses whether the strategic investment meets the conditions prescribed in these Measures;

(3) The shareholders’ meeting of the listed company passes a resolution on issuing new shares to foreign investors;

(iv) The listed company has completed the registration procedures in accordance with the regulations of the securities regulatory authority of the State Council and the stock exchange and obtained the registration decision;

(5) A listed company applies to a securities registration and clearing institution for share registration procedures;

(VI) After a listed company completes a private placement, the foreign investor or the listed company shall submit investment information to the competent commercial department.

Article 13 Where a foreign investor subscribes for new shares as an issuer determined through bidding, the strategic investment shall be handled in accordance with the following procedures:

(1) The board of directors or shareholders’ meeting of the listed company passes the relevant resolution on the private placement of new shares;

(2) The listed company has fulfilled the registration procedures for stock issuance in accordance with the regulations of the securities regulatory authority of the State Council and the stock exchange and obtained the registration decision;

(3) After a foreign investor is determined as the target of issuance through bidding, the listed company and the foreign investor sign a contract for private placement;

(iv) A listed company applies to a securities registration and clearing institution for share registration procedures;

(V) After a listed company completes a private placement, the foreign investor or the listed company shall submit investment information to the competent commercial department.

Article 14 Where a strategic investment is implemented through transfer by agreement, the proportion of shares acquired by the foreign investor shall not be less than 5% of the shares issued by the listed company and shall be handled in accordance with the following procedures:

(1) Listed companies shall comply with relevant internal procedures in accordance with laws, regulations and the company’s articles of association;

(2) The transferor and the foreign investor sign a share transfer agreement;

(3) The transferor and the transferee shall go through the procedures for share transfer confirmation with the stock exchange and apply to the securities registration and clearing institution for registration and transfer procedures;

(IV) After the foreign investor and the listed company complete the transfer by agreement in accordance with relevant regulations, the foreign investor or the listed company shall submit the investment information to the competent commercial department.

Article 15 Where a strategic investment is implemented through a tender offer, the proportion of shares of a listed company that a foreign investor intends to acquire shall not be less than 5% of the shares issued by the listed company, and shall be handled in accordance with the following procedures:

(1) A summary of the tender offer report prepared by the foreign investor in accordance with the law;

(ii) Foreign investors, listed companies and related parties shall comply with laws, regulations and the relevant provisions of the securities regulatory authority of the State Council and the stock exchanges to perform reporting, announcement and other procedures;

(3) The foreign investor shall go through the procedures for share transfer confirmation at the stock exchange and apply to the securities registration and clearing institution for temporary custody of the pre-tendered shares, share transfer settlement and transfer registration procedures;

(IV) After the foreign investor completes the tender offer in accordance with relevant regulations, the foreign investor or the listed company shall submit the investment information to the competent commercial department.

Article 16 Foreign investors implementing strategic investments in listed companies shall perform information disclosure and other statutory obligations in accordance with the Securities Law of the People’s Republic of China and relevant regulations of the securities regulatory authority of the State Council and the stock exchanges.

If a foreign investor’s strategic investment constitutes an acquisition of a listed company and related share equity changes, the prepared equity change report, tender offer report and its summary, and listed company acquisition report and its summary shall disclose whether the strategic investment involves the negative list for foreign investment access and whether it meets the conditions stipulated in Articles 5, 6 and 7 of these Measures.

Article 17 Foreign investors implementing strategic investment involving securities registration and settlement matters shall go through relevant procedures in accordance with relevant regulations on securities registration and settlement. When foreign investors go through relevant procedures with securities registration and settlement institutions, they shall submit materials such as identity certificates, intermediary agency reports, stock issuance registration documents or share transfer confirmation documents; if they fall under the circumstances specified in Article 7 of these Measures, they shall also submit materials proving that relevant procedures for outbound investment have been completed.

If the materials specified in the preceding paragraph are not submitted or the intermediary agency report submitted considers that the strategic investment does not comply with the relevant provisions of these Measures, the securities registration and settlement agency will not handle the relevant procedures.

For non-circulating shares held by foreign investors before the equity split reform of listed companies or shares held by listed companies before their A shares were listed, securities registration and settlement institutions may open securities accounts for them upon application by foreign investors.

Article 18 A foreign investor may transfer A shares acquired through strategic investment under the following circumstances:

(1) after the expiration of the restricted sale period, the shares are transferred in accordance with relevant national regulations;

(II) Before the expiration of the lock-up period, if the above-mentioned shares need to be transferred due to the death of the foreign investor, termination of the legal person, judicial deduction, etc., the transfer shall be handled in accordance with the relevant national regulations, subject to the premise of complying with the Securities Law of the People’s Republic of China and the relevant regulations of the securities regulatory authority of the State Council, the stock exchange, and the securities registration and settlement agency.

Except for continuing to make strategic investments in listed companies and the circumstances stated in the preceding paragraph, foreign investors may not use securities accounts opened for strategic investments to buy or sell securities.

Article 19 After a foreign investor completes a strategic investment in a listed company, if the cumulative change in the foreign investor’s shareholding ratio exceeds 5% or there is a change in the foreign party’s controlling or relative controlling position, the foreign investor or the listed company shall submit investment information to the commercial authorities.

Article 20 Where a strategic investment involves the circumstances specified in the second paragraph of Article 6 of these Measures and has been completed on schedule, the transfer of the investment by the wholly-owned investor to the foreign investor shall comply with the provisions of Article 10 of these Measures on the restricted sale period, and the new transferee shall still meet the conditions specified in these Measures, assume the rights and obligations of the wholly-owned investor and the foreign investor in the listed company, and perform obligations such as information disclosure in accordance with the law.

Article 21 Strategic investments by foreign investors involving overseas investments by state-owned enterprises and state-controlled listed companies or changes in state-owned equity in listed companies shall comply with relevant provisions on state-owned asset management.

Article 22 Where a strategic investment by a foreign investor constitutes a concentration of undertakings and meets the reporting standards prescribed by the State Council, the undertakings shall report it in advance to the anti-monopoly law enforcement agency of the State Council. Concentration shall not be implemented without reporting.

Article 23 Where foreign investors implement strategic investments involving matters related to foreign exchange administration, they shall go through the relevant procedures such as foreign exchange registration and cancellation, account opening and cancellation, foreign exchange settlement and sales, and cross-border receipts and payments in accordance with the relevant foreign exchange administration regulations.

Article 24 If a strategic investment involves changes in the registration matters of a listed company, the listed company shall apply to the market supervision and administration department for registration procedures in accordance with the law.

Article 25 Where strategic investments involve tax matters, they shall be handled in accordance with laws, administrative regulations and relevant national provisions, and shall be subject to supervision and inspection by the tax authorities in accordance with the law.

Article 26 Where a foreign investor’s strategic investment in a listed company affects or may affect national security, a security review shall be conducted in accordance with the Measures for Security Review of Foreign Investment and other relevant regulations.

Article 27 Where foreign investors make strategic investments in listed financial institutions, they shall also comply with relevant State regulations on foreign-invested financial institutions.

Article 28 Administrative organs and their staff must be loyal to their duties and perform their duties in accordance with the law. They must not use their position to seek improper benefits. Commercial secrets learned in the course of performing their duties must be kept confidential in accordance with the law and must not disclose or illegally provide them to others.

Article 29 If a foreign investor does not comply with the provisions of Article 4, 5, 6 or 7 of these Measures and implements strategic investment in violation of regulations by means of false statements, the competent commerce department may give a warning or issue a notice of criticism in accordance with the law; if the circumstances are serious, a fine of no more than RMB 100,000 may be imposed.

Article 30 The competent commercial departments shall supervise and inspect the performance of foreign investment information reporting obligations by foreign investors and listed companies in accordance with the relevant provisions of the Foreign Investment Law of the People’s Republic of China and the Measures for the Reporting of Foreign Investment Information. Those who fail to submit investment information in accordance with the provisions shall be dealt with in accordance with the law.

Article 31 If the investment activities of foreign investors violate the negative list for foreign investment access, the relevant departments shall handle them in accordance with the Foreign Investment Law of the People’s Republic of China and relevant regulations.

Article 32 If an intermediary institution fails to perform its duties diligently and the documents it produces or issues contain false records, misleading statements or major omissions, the securities regulatory authority of the State Council shall handle it in accordance with the Securities Law of the People’s Republic of China and relevant regulations.

Article 33 The following situations are not subject to these Measures, but they must comply with relevant national regulations:

(1) Investment in listed companies by qualified foreign institutional investors and RMB qualified foreign institutional investors;

(ii) Foreign investors investing in listed companies through the domestic and overseas stock market interconnection mechanism;

(3) Shares of listed companies acquired by foreign investors as a result of the listing of foreign-invested joint-stock companies in which they invested on the A-share market;

(iv) Foreign natural persons who purchase and sell listed company shares in the secondary market or acquire listed company shares through equity incentives in accordance with the relevant regulations of the securities regulatory authority of the State Council.

Article 34 Where foreign investors implement strategic investment in companies listed on the National Equities Exchange and Quotations, these Measures shall apply.

Article 35 Investors from the Hong Kong Special Administrative Region, the Macao Special Administrative Region, Taiwan, and Chinese citizens residing abroad who make strategic investments in listed companies shall follow these Measures.

Article 36 These Measures shall come into force on December 2, 2024. Order No. 28 of 2005 (Measures for the Administration of Strategic Investments by Foreign Investors in Listed Companies) issued by the Ministry of Commerce, the China Securities Regulatory Commission, the State Administration of Taxation, the former State Administration for Industry and Commerce, and the State Administration of Foreign Exchange shall be repealed simultaneously.