SAFE Deepens Reform of Foreign Exchange Administration for Cross-Border Investment and Financing
On 15 September 2025, the State Administration of Foreign Exchange (“SAFE“) of the People’s Republic of China released the Notice on Deepening the Reform of Foreign Exchange Administration for Cross-Border Investment and Financing (Circular [2025] No. 43) (关于深化跨境投融资外汇管理改革有关事宜的通知, “Notice“), introducing reform measures in foreign direct investment (FDI), cross-border financing, and the use of capital account receipts. The reforms aim to streamline foreign exchange processes and facilitate cross-border investment and financing in China. The key changes include, among others, the following:
- Remove the requirement for registration of preliminary information for advance funds used in investments by foreign investors in China. Foreign investors who need to remit advance funds prior to establishing a foreign-invested enterprise in China may directly open an advance funds account at a bank and remit the advance funds into it, without the need to complete the registration of preliminary information for the advance funds before opening the account.
- Remove the requirement for domestic reinvestment registration by foreign-invested enterprises. Provided that such reinvestment does not violate the Special Administrative Measures for Market Access of Foreign Investment and the domestic investment project is genuine and compliant, foreign-invested enterprises may conduct domestic reinvestment using their foreign exchange capital and the Renminbi (“RMB“) proceeds from settlement of foreign exchange. The investee enterprise or equity transferor is exempt from registering basic information or changes related to receiving domestic reinvestment. Funds for domestic reinvestment may be directly transferred to the relevant accounts.
- Update the negative list of the use of capital account receipts. Capital account receipts include direct investment and foreign debt funds. While the updated rules continue to require that capital funds, foreign exchange receipts from external debt, and RMB funds obtained through foreign exchange settlement of non-financial enterprises be used for genuine and self-use purposes, the negative list has been limited to three restrictions: (i) funds may not be used for expenditures prohibited by laws and regulations; (ii) unless otherwise specified, funds may not be invested directly or indirectly in securities or other wealth management products (except for low-risk products such as structured deposits rated Level 2 or below); and (iii) funds may not be used to provide loans to non-affiliated enterprises (unless explicitly permitted by the enterprise’s business scope).
SAFE has also released the guidelines in relation to the Notice. How the reforms are implemented will still be subject to the local practice of the banks. It is advisable to keep close communication with a local bank if a company intends to utilise the reform measures in the Notice.
China Releases Administrative Measures for Reporting National Cybersecurity Incidents
On 11 September 2025, the Administrative Measures for Reporting National Cybersecurity Incidents (国家网络安全事件报告管理办法, “Measures“) were issued by the Cyberspace Administration of China (“CAC“) and will take effect on 1 November 2025. These measures were formulated pursuant to the People’s Republic of China (“PRC“) Cybersecurity Law, the PRC Data Security Law, the PRC Personal Information Protection Law, and the Regulations on the Security Protection of Critical Information Infrastructure. The Measures aim to standardise the reporting of cybersecurity incidents, minimise damage, and ensure timely response and accountability. The key features of the Measures include the following:
- Scope of application: The Measures apply to all network operators within the territory of the PRC. These include entities that build, operate, or provide services through networks, such as government agencies, enterprises, and operators of critical information infrastructure. Third-party service providers are also subject to reporting obligations through contractual arrangements.
- Incident classification and reporting timelines: Cybersecurity incidents are categorised into four levels: (i) general; (ii) relatively large; (iii) major; and (iv) especially major. The classification is based on the national standard GB/T 20986-2023. Reporting timelines vary by severity: (i) especially major incidents must be reported within 30 minutes; (ii) major incidents within one hour; and (iii) other incidents within two to four hours depending on the type of organisation involved.
Reporting requirements: Reports must include detailed information such as the affected entity, time and location of the incident, type and severity, impact and mitigation efforts, preliminary cause analysis, clues for tracing the attack, planned response actions, and status of scene preservation. After the incident is resolved, a summary report must be submitted within 30 days, covering the cause, response measures, impact, accountability, and lessons learned.
Legal liability and enforcement: Failure to report, delayed reporting, false reporting, or concealment of incidents may result in administrative penalties under applicable laws. Individuals responsible for violations may also face personal liability. However, if an entity has taken reasonable protective measures and reported the incident promptly, enforcement authorities may consider leniency.
- Implementation and reporting channels: CAC has established unified reporting channels including a hotline (12387), official websites, email, and fax. The system aims to build a standardised, institutionalised, and refined national cybersecurity incident reporting framework. Social organisations and individuals are encouraged to report significant incidents within the prescribed timelines, contributing to a broader national cybersecurity defence effort.
PRC Supreme People's Court Issues Judicial Interpretation II on the Application of Law in Employment Dispute Cases
On 31 July 2025, the Supreme People’s Court of the People’s Republic of China (“PRC“) issued the Interpretation on the Application of Law in the Employment Dispute Cases (II) (关于审理劳动争议案件适用法律问题的解释(二), “Judicial Interpretation II“), together with six typical employment dispute cases. Judicial Interpretation II took effect from 1 September 2025. The key highlights are set out below.
- Use of non-compete clauses: The PRC Employment Contract Law permits post-employment non-compete agreements to take effect for a maximum of two years, and allows the employee and employer to negotiate and agree on the non-compete scope, territory and duration. It also stipulates that non-compete obligations only apply to senior management, senior technical personnel, and personnel with confidentiality obligations. In addition, the law mandates the employer to pay non-compete compensation to the employee on a monthly basis, from the termination of the latter’s employment or the expiry of the employment contract until the end of the non-compete period. Judicial Interpretation II provides further clarification on the enforcement of a non-compete clause as follows:
- Scope and proportionality (Article 13): Where an employee does not know or does not have access to an employer’s trade secrets or intellectual property (IP)-related confidential information, the court will support the employee’s request to declare that the non-compete clause is ineffective. Even where a non-compete clause is permissible, its scope, territory, and duration must be proportionate to the employee’s actual exposure; any portion that exceeds a reasonable proportion is invalid. These standards largely reflect existing judicial practice and are now expressly reaffirmed through this judicial interpretation.
- In-service non-compete clauses (Article 14): Judicial Interpretation II reconfirms the validity of in-service non-compete arrangements for senior managers, senior technical personnel, and other personnel with confidentiality obligations. The court will not uphold an employee’s claim to invalidate a non‑compete clause solely on the ground that in‑service non‑compete clauses are impermissible or that the non-compete compensation has not been paid.
- Breach and remedies (Article 15): If an employee breaches a valid non-compete agreement, the court will support the employer’s claim to recover non-compete compensation already paid and enforce agreed liquidated damages.
- Confirmation of employment for expatriate employees: Article 4 of Judicial Interpretation II clarifies that when foreign nationals seek confirmation of employment relationship with a PRC employer, the People’s Court of the PRC will uphold such claim if the individual: (i) holds permanent residence status in China; (ii) holds a valid work permit and is lawfully residing in China; or (iii) has completed relevant procedures in accordance with PRC regulations.
- Litigation status of foreign enterprises’ representative offices in China: There has been longstanding judicial uncertainty in China over whether foreign enterprises’ representative offices in China have the capacity to be a party to employment litigation. Article 5 of Judicial Interpretation II now confirms that a duly established representative office of a foreign enterprise can be a party to employment litigation, and that where an employee requests that a foreign enterprise be included in the proceeding, the court will grant such request.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice
