China Rolls Out Additional Policies to Boost Foreign Firms’ Reinvestment

China’s new measures to encourage reinvestment offer tax benefits, faster approvals, and financing support to foreign firms reinvesting profits in China, part of a broader strategy to stabilize FDI and deepen economic ties.

In a significant move to deepen economic openness and retain foreign capital, China has introduced a new set of incentives aimed at encouraging foreign-invested enterprises (FIEs) to reinvest their profits within the country. On July 7, 2025, seven key government agencies—including the National Development and Reform Commission (NDRC), the Ministry of Finance, and the People’s Bank of China—jointly issued the Notice on Implementing Several Measures to Encourage Domestic Reinvestment by Foreign-Invested Enterprises (the Notice).

Find Business Support

Learn How DSA Can Help with Your Asia Expansion

This is also a follow-up to earlier reforms introduced in June 2025 that focused on tax credits for reinvested foreign profits. That initiative, outlined in our article China Grants 10% Tax Credit for Overseas Investors Reinvesting Profits, laid important groundwork for a more robust policy framework. The latest measures build on that momentum, addressing practical barriers and providing broader regulatory and financial support.

Over the past two decades, FIEs have contributed an estimated 20 to 30 percent of China’s GDP growth. However, the landscape has recently shifted. In 2024, China experienced a net outflow of foreign investment, and in the first half of 2025, the value of inbound foreign investment declined by 15.2 percent year-on-year. Against this backdrop, the new policy is far more than a routine regulatory update—it reflects China’s growing urgency to stay competitive in the global race for capital and innovation, particularly amid evolving global supply chains and investment realignments.

In this article, we unpack China’s new reinvestment policy for FIEs, explain its key measures, and explore what it means in light of recent foreign investment trends and economic priorities.

What qualifies as reinvestment?

According to the Notice, the newly released measures apply to a broad range of reinvestment scenarios. Specifically, they cover cases where:

• FIEs reinvest their undistributed profits within China; or
• Overseas investors reinvest legally obtained onshore profits—whether in RMB or foreign currency—into the Chinese market.

Eligible reinvestment activities include:

• Establishing new enterprises;
• Increasing capital in existing ones;
• Acquiring shares, equity stakes, or similar interests in Chinese companies; and
• Investing directly in domestic projects.

Notably, unlike the withholding tax deferral and the 10 percent tax credit introduced earlier, this latest policy package does not require the reinvestment to fall within the scope of the Catalogue of Encouraged Industries for Foreign Investment. By broadening the definition of qualified reinvestment, China is clearly sending a message to existing foreign investors: stay, grow, and you will be supported.

What are the new measures proposed to encourage reinvestment?

According to the Notice and the official Q&A, the new policy represents a deepening of China’s foreign investment promotion regime and a more proactive strategy to attract and retain foreign capital. The measures are intended to provide targeted support for FIEs and overseas investors reinvesting in China from below perspectives:

1. Strengthening project service mechanisms

Local governments are required to establish dedicated project databases to track and support reinvestment activities by FIEs. Projects that meet certain qualifications may be included in lists of major or priority foreign investment initiatives, allowing them to access additional policy incentives and administrative support.

2. Optimizing industrial land use policies

To reduce early-stage project costs, FIEs engaged in reinvestment may access industrial land through more flexible arrangements, such as long-term leasing, lease-to-own models, or adjustable-term land transfers. These mechanisms will be implemented in line with existing land-use incentive policies.

3. Streamlining approval procedures for wholly owned subsidiaries

When a FIE establishes a wholly owned subsidiary in China that operates in the same sector as the parent, and that parent has already obtained the necessary market access qualifications, the relevant regulators are instructed to simplify and expedite the approval process for the new entity.

4. Implementing and expanding fiscal and equipment-related incentives

The policy reinforces the application of tax incentives designed to encourage the reinvestment of foreign-earned profits into the domestic economy. In addition, projects classified under the Catalogue of Encouraged Industries for Foreign Investment may enjoy favorable treatment when importing equipment for production.

5. Facilitating the use of foreign exchange profits

FIEs and their foreign shareholders may reinvest legitimately obtained profits—whether in RMB or foreign currency—back into China. Under compliant circumstances, these foreign exchange funds may be transferred domestically without requiring additional reinvestment registration by the receiving entity, provided the project is real and conforms to investment access rules.

6. Expanding financial support and promoting innovation in financing tools

Cross-border shareholder loans and financing instruments such as Panda Bonds may now be processed through a “green channel” for faster review. At the same time, banks and other financial institutions are encouraged to develop customized, risk-controlled financial products and services to support reinvestment needs.

7. Promoting information transparency and inter-agency coordination

The notice calls for pilot programs to strengthen the reporting of reinvestment-related activities by foreign enterprises and to improve information sharing between departments. This will facilitate access to relevant support policies and enhance regulatory efficiency.

8. Improving investment evaluation standards

Authorities are asked to refine their performance evaluation frameworks for foreign investment by placing greater emphasis on the practical contribution of reinvestment to local development, rather than relying solely on aggregate investment totals.

How to read the new measures

While the new measures offer practical support for reinvestment, their broader significance lies in what they signal about China’s evolving investment environment. These are not just isolated regulatory tweaks; they reflect an institutional shift toward long-term capital retention and high-quality foreign investment. By removing key operational bottlenecks and promoting inter-agency coordination, the policy offers a clearer and more supportive path for foreign firms seeking to grow their presence in China.

For foreign businesses, this means:

• China wants existing investors to deepen their roots: The emphasis on reinvestment—rather than just fresh inflows—suggests that the government now sees value not only in new entries but also in sustained, cumulative engagement.
• Operational ease is becoming a policy priority: Streamlined licensing, land flexibility, and FX facilitation show that China is responding to common investor pain points and aiming to reduce the friction of doing business on the ground.
• Engagement at the local level matters: Many of the new tools—such as project pipelines and support databases—will be administered by provincial and municipal governments. Investors should engage early with local authorities to understand how policies will be implemented in practice.

In short, the message is clear: foreign businesses that reinvest strategically, align with national priorities, and engage proactively with local stakeholders are more likely to benefit from China’s new reinvestment push.

Why now—and what’s next?

So, why is China doing this now? According to NDRC officials, this policy stems directly from recent Central Political Bureau directives and growing calls from the foreign business community. Many companies, during consultations and feedback sessions, expressed frustration over the red tape and uncertainty they face when expanding existing operations. These measures are an attempt to address those concerns and ensure that China remains a top destination, not just for initial investment, but for long-term capital commitment.

Find Business Support

Have Any Questions? Reach out to our local experts

The urgency is underscored by recent foreign investment trends. In 2024, China experienced a net outflow of foreign direct investment (FDI). During the first half of 2025, the value of inbound FDI dropped by 15.2 percent year-on-year. While high-tech sectors continued to show promise—actual FDI into e-commerce services, chemical pharmaceuticals, aerospace equipment, and medical device manufacturing rose by 127.1 percent, 53 percent, 36.2 percent, and 17.7 percent,t respectively—this growth was not enough to offset the overall decline. Given the significant role foreign investment plays in supporting China’s GDP—contributing an estimated 20 to 30 percent to growth over the past two decades—the Chinese government has strong motivation to reverse this downward trend and restore confidence among foreign investors.

Looking ahead, the NDRC says it will work closely with other departments and local governments to ensure smooth implementation. Among the upcoming steps are:

• Launching another round of major foreign investment projects, supported with customized services and fast-tracked approvals;
• Updating the Catalogue of Encouraged Industries for Foreign Investment, with a likely emphasis on advanced manufacturing, clean energy, digital economy, and regional development in central, western, and northeastern China; and
• Continuing on-the-ground engagement with foreign businesses to monitor policy rollout and capture new feedback.

Taken together, these efforts demonstrate China’s renewed commitment to retaining foreign capital, not just by opening the door, but by making it easier to stay and grow.

• Previous Article China’s Strategy for Advancing High-End Medical Devices in 2025
• Next Article