China’s ODI Rules Just Changed—Here’s What It Means for Cross-Border Tech Transactions

At a Glance

On June 1, 2026, China’s State Council published the Regulations on Outbound Investment (国务院关于对外投资的规定, the “ODI Regulations”), effective July 1, 2026. The key takeaways are as follows:

• The ODI Regulations materially expand China’s existing outbound direct investment (ODI) regime, pulling within scope new types of cross-border technological collaboration and investments overseas by individuals resident in China.
• ODI review now integrates technology export licensing, export controls, and data transfer compliance. A standard ODI filing is no longer sufficient—companies must assess triggers across multiple regulatory regimes.
• “Offshore washing”—using Cayman/BVI structures, IP migrations, or personnel relocations to place China-origin capabilities beyond regulatory reach—is now squarely targeted. Offshore structuring alone no longer insulates transactions from PRC regulatory review.
• A discrete new outbound investment security review process has been created. Regulators can look through corporate form and offshore incorporation to reach China-origin strategic capabilities.
• The ODI Regulations include countermeasures and penalties for foreign investment and trade restrictions deemed discriminatory against Chinese entities.
• By including transactions involving assets or interests acquired through prior overseas investments within scope, the ODI Regulations give PRC regulators an express jurisdictional “hook” for scrutinizing cross-border structures already in place.

Detailed Analysis

China’s existing ODI regime, administered by the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), and the State Administration of Foreign Exchange (SAFE), discretely targeted overseas equity investments by Chinese enterprises. With the new ODI Regulations, the State Council, China’s cabinet-level body, has embraced a more comprehensive approach, regulating a broader range of cross-border investment flows and overseas holding structures and integrating China’s ODI review regime with China’s broader foreign investment-related legal architecture—including technology export licensing, cross-border data regulation, national security review, and anti-foreign sanctions—while expanding the scope of regulated parties, establishing a discrete security review regime for ODI, and escalating penalties for non-compliance.

Notably, the ODI Regulations also close perceived gaps in the prior regulatory framework. First, they clarify that technology transfers effected through the deployment of technical personnel or the arrangement of overseas training fall within the scope of technology export restrictions—not only formal IP assignments, licensing transactions, or cross-border technology support services. Second, they establish that purely offshore transactions and restructurings that may affect China’s national security are subject to review by Chinese regulators, regardless of where the relevant entities are incorporated or how the transaction is structured.

This alert focuses on three implications of the ODI Regulations:

(1) The integration of technology export and data transfer oversight into ODI compliance;

(2) The practical impact on “offshore washing” structures used by China-linked technology companies to raise foreign capital, relocate personnel and assets, and prepare for overseas exits; and

(3) The new penalties framework authorizing Chinese regulators to launch investigations, impose penalties, and take other necessary actions to counter foreign investment and trade restrictions deemed discriminatory against Chinese entities.

I. Broader and More “Penetrating” ODI Framework

The ODI Regulations define ODI broadly to cover activities by which PRC “investors” (including enterprises, other organizations, and resident individuals) directly or indirectly acquire ownership, control, management rights, or other interests in overseas enterprises or assets, by investing assets or equity, contributing financing or guarantees, or other means.

Perhaps the single most significant feature of the ODI Regulations is their expansion of ODI review beyond investments by Chinese companies to those by individuals resident in China as well (e.g., founders), dramatically changing the regulatory landscape for PRC entrepreneurs in the technology and other sectors, as discussed further in part III below. Detailed implementation rules to govern ODI by individuals remain to be issued by NDRC and MOFCOM.

Other important implications of the broader definition of ODI include:

• First, it covers reinvestment transactions involving assets or interests obtained from prior outbound investments. The language provides PRC regulators with continuing jurisdiction over follow-on transactions and has significant potential implications for existing offshore founder vehicles, employee holding platforms, Cayman/BVI structures, and fund structures not previously scrutinized through an ODI lens.
• Second, it reflects a “substance-over-form” approach. Whether an investment transaction triggers an ODI review does not turn solely on where the investment vehicle is incorporated, but also on whether PRC-origin assets, technologies, data, or other strategic resources or capabilities are being moved offshore or otherwise placed under foreign control. This approach may be of particular concern for China-linked technology companies with upstream or downstream holding structures that involve offshore companies.

II. Technology Export Review Under ODI Assessment

A key practical change for technology companies is Article 13 of the ODI Regulations, which integrates technology exports, export controls, data transfers, cross-border services, and personnel deployments into the ODI compliance analysis.

Article 13 prohibits ODI investors from exporting or using prohibited goods, technologies, services, or related data, and requires prior approval for restricted items. More importantly, it expressly targets indirect or “disguised” transfers through deploying technical personnel overseas or arranging cross-border training, unless the relevant approvals have been obtained.

This closes a practical gap under the prior technology export framework. Under that framework, oversight focused on formal IP assignments, licenses, cross-border technology services, source-code transfers, and delivery of controlled items. Relocations of engineers or other technical personnel, cross-border access to development environments, and the re-situating of ongoing R&D projects from China overseas were not explicitly regulated. Article 13 now brings these personnel- and operations-mediated transfers into the ODI regulatory frame.

This matters because technology does not always move through a formal assignment/licensing contract. In many outbound transactions, the relevant capability may move through:

• Offshore migration of engineers or R&D teams;
• Access by overseas personnel to China-based code repositories, development environments, or technical documentation;
• Transfer of production specifications, process know-how, or industrial software;
• Establishment of overseas R&D centers that continue work originated from China;
• Remote technical support or training; or
• Mirroring of product data or training data, or licensing/contribution of algorithms, models, or source code, to overseas servers.

Under the ODI Regulations, completing a typical ODI filing will not be enough. Companies must now also assess whether the project triggers technology export filing or approval under the Administrative Regulations on Technology Import and Export (TIER), export control obligations under the Export Control Law, data export requirements under the Data Security Law and Personal Information Protection Law, cybersecurity obligations under the Cyber Security Law, or other national security-related restrictions.

For technology companies in sensitive industries such as AI, semiconductors, advanced manufacturing, telecommunications, robotics, and dual-use technology, this analysis should be conducted at the project-planning stage and continue as projects unfold. The diligence should examine not only formal IP ownership and license arrangements, but also consider where the technology was originally developed, which personnel contributed to it, which entity controls the relevant repositories and systems, whether offshore teams can access domestic R&D environments, and whether any restricted technology or related data will be provided overseas through training, technical services, or operational support.

III. Impact on “Offshore Washing”

The broadened scope of ODI regulated by the ODI Regulations already discussed in part I above calls for a reassessment of the offshore holding structures that have underpinned China-linked venture capital and pre-IPO financing for decades. These structures often involve a Cayman or BVI holding company, intermediate offshore entities, PRC operating subsidiaries, and, where required, contractual control structures like Variable Interest Entities. The ODI Regulations do not expressly prohibit these arrangements, but make it clear that offshore structuring does not, by itself, eliminate China regulatory risk. Notably:

• The broad definition of ODI may bring greater scrutiny to arrangements (even when implemented through multiple steps over a period of time) in which a PRC-origin founder, entity, or controlled group contributes assets, equity, technology, or other resources to an offshore vehicle for capital raising, business relocation, or overseas exit purposes.
• In light of Article 13 of the ODI Regulations, transfers of technology, data, or personnel from a PRC entity to an offshore group company, even if undertaken solely for internal restructuring reasons, should be reviewed for ODI compliance.
• The regulators now have the express power to treat a sequence of structuring steps as one integrated arrangement. A company that first moves its headquarters, IP, personnel, or data offshore and later pursues foreign financing may still face scrutiny if the earlier restructuring is viewed as part of a broader effort to move China-origin capabilities outside China’s oversight.

For this reason, “offshore washing” is now squarely on China’s regulatory radar. Companies that have completed offshore restructurings without conducting TIER, export control, or data compliance analyses should consider assessing their post-transaction exposure. Notably, that assessment may need to take account of overseas rules as well as the ODI Regulations—an unwinding of a restructuring due to PRC ODI concerns may trigger export control or licensing requirements in a relevant foreign jurisdiction. Companies planning new restructurings should build a complete record of technology ownership, development history, employee assignments, IP transfers, technology services, data flows, system access rights, and intercompany arrangements before implementation.

IV. National Security Review of ODI

Article 15 establishes an outbound investment security review regime as a counterpart to China’s existing inbound foreign investment security review. NDRC and MOFCOM, together with other relevant authorities, will review ODI—as well as related transfers or disposals of assets and interests—that may affect China’s national security. The implementation rules have not yet been issued, and important details remain unclear (such as filing thresholds, review procedures, timelines, substantive criteria, and mitigation options). Notably, the reference to “transfers” and “disposals” suggests that the regulatory review may extend beyond the initial outbound investments to subsequent sales, spin-offs, reorganizations, dispositions, or exits involving overseas assets or interests derived from a PRC investor’s outbound investment.

Investors should be wary about the possible retrospective application of Article 15 to transactions that have already closed. Leading up to and following the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), CFIUS undertook a major campaign of retrospectively scrutinizing closed transactions and ordering forced divestitures. Will PRC authorities take a similar approach, and use the new ODI Regulations to justify retrospective review of potentially sensitive historical restructurings, IP migrations, offshore R&D buildouts, and foreign exits? Companies with exposure should not wait for the implementation rules before beginning a risk assessment.

International companies considering the impacts of China’s ODI Regulations may already be familiar with the United States’ own outbound investment regime. As discussed in a prior client alert, that regime, implemented through rules issued by the U.S. Department of the Treasury on October 28, 2024, restricts and requires notification of specified U.S. investments in Chinese entities engaged in discrete, sensitive technology sectors such as semiconductors and artificial intelligence. In comparison, the ODI Regulations are broader in both sectoral coverage and regulatory reach—encompassing not only equity investments but also technology transfers, personnel deployments, data flows, and offshore restructurings across all industries. Together, these two regimes create a tightening regulatory corridor for cross-border technology transactions, requiring companies operating at the intersection of U.S. and Chinese interests to navigate overlapping and potentially conflicting compliance obligations.

V. Penalties

The ODI Regulations significantly expand the consequences of non-compliance. Under prior NDRC and MOFCOM ODI rules, consequences were often administrative: denial or revocation of filings, warnings, rectification orders, and the like. Articles 27 to 30 of the ODI Regulations also provide for fines of 0.1% to 1% of the investment amount (depending on the violation), confiscation of illegal gains, mandatory disposal of shares or assets, orders to stop investment activities, refusal to accept future filings for up to three years, bans on outbound investment for one to three years, and personal liability for directly responsible individuals (fines ranging from RMB 20,000 to 100,000, approximately USD 3,000 to 14,800 at the time of this alert).

As a result, ODI compliance should no longer be viewed as a procedural issue that can be cured through retrospective filings or supplemental reports. China’s ODI compliance now impacts deal execution and potentially creates personal liability for the individuals involved.

VI. Practical Recommendations

The ODI Regulations have potentially far-reaching implications. Companies and individuals contemplating new outbound investments, offshore restructurings, or cross-border technology-linked transactions should consider the following steps:

• Conduct integrated “ODI + technology export + data export” diligence at the project-planning stage: Assess whether ODI arrangements and related technical support, training, personnel relocation, and post-closing integration may involve controlled goods, technologies, services, or data;
• Trace origin of core technology: Identify where key technology was developed, who contributed, which entity owns or uses it, whether continued technology or personnel support is required, and whether any offshore transfers required approval or licensing;
• Review scope of access to data and systems: Assess whether offshore affiliates, acquirers, or third parties have access to China-based systems, datasets, or technical environments;
• Review cross-border personnel arrangements: Evaluate whether proposed relocations of personnel or overseas technical support or training might be deemed to be regulated technology transfers;
• Embed regulatory compliance in transaction documents: Include applicable PRC regulatory approvals and filings such as those concerning ODI, foreign exchanges, technology and data exports, and national security reviews as conditions precedent; and
• Complete pre-closing ODI procedures: Obtain required NDRC, MOFCOM, SAFE, and other approvals or registrations before closing.

Meanwhile, companies and individuals with existing investments or businesses that might appear to have been pulled into the ODI framework due to the wide scope of the ODI Regulations should assess their exposure. Passive portfolio investors—for example, holders of publicly traded shares in offshore-listed Chinese companies—are less likely to be targets under the new ODI regime. The primary concern lies with active market participants whose existing arrangements involve the exercise of controls, management rights, or the transfers of technology, data, or other strategic resources contemplated by the ODI Regulations. They should consider the following steps:

• Audit historical ODI projects and maintain post-closing compliance: Review completed investments, restructurings, and offshore migrations for missing or outdated filings, registrations, and certificates, especially in connection with ownership changes, capital changes, IP or technology transfers, personnel relocations, and post-closing technology, data transfers, or asset disposals;
• Assess current compliance posture: Evaluate whether existing cross-border arrangements—including intercompany technology services, data access, personnel secondments, and system access rightswould require approval or filing under the ODI Regulations if initiated today, and consider whether remedial filings or restructuring may be desirable;
• Maintain compliance documentation: Preserve and organize records regarding technology development history, IP ownership, personnel assignments, data governance arrangements, and intercompany relationships that may become relevant in future regulatory reviews;
• Monitor implementation rules of the ODI Regulations: As the ODI Regulations defer certain enforcement details to forthcoming implementation rules to be issued by NDRC, MOFCOM, and other authorities, market participants with existing exposure should track these developments closely, as the implementation rules should clarify filing thresholds, review procedures, and possibly also the treatment of historical transactions.

As further explained in the Terms / Notices linked below, the information provided herein is not legal advice. Any information concerning the People’s Republic of China (PRC) is not an opinion on, determination on, or certification of the application of PRC law. We are not licensed to practice PRC law.