China Implements Stricter Controls on Cross-Border Investment for Global Managers

New Regulations Impact Global Asset Managers

China has implemented new measures that significantly tighten its cross-border investment program, specifically limiting the avenues through which global managers can allocate funds for mainland clients. A key development in this regard is the Regulation on the Supervision and Administration of Private Investment Funds, which came into effect on September 1, 2023. This regulation explicitly prohibits offshore institutions from directly raising commitments from PRC domestic investors unless otherwise permitted by the State.

Restrictions on Direct Fundraising

The 2023 regulation marks a pivotal shift, creating ambiguity regarding the scope of exceptions for programs like the Qualified Domestic Institutional Investor (QDII), Qualified Domestic Limited Partner (QDLP), and Qualified Domestic Investment Enterprise (QDIE) schemes. Previously, programs such as the QDLP scheme were designed to allow foreign asset managers in Shanghai's free trade zone to sell overseas investment products directly to wealthy Chinese clients. However, reports from 2016 indicated a suspension of the QDLP program due to a renewed focus on controlling capital outflows, with the successor QDII2 program also being delayed. This recent regulation reinforces a cautious approach to direct cross-border fundraising by foreign entities.

Evolving Outbound Investment Landscape

Despite these tightening measures for global managers, China's broader cross-border investment landscape presents a more nuanced picture. The State Administration of Foreign Exchange (SAFE), the country's foreign exchange regulator, plays a central role in managing these flows. While direct fundraising by offshore institutions faces new hurdles, SAFE has also taken steps to facilitate certain outbound investments. For instance, in June 2024, China lifted its cap on foreign securities investment for the first time since July 2023, increasing the total quota for the Qualified Domestic Institutional Investor (QDII) program to $167.8 billion as of the end of May. Furthermore, in August 2024, several Chinese funds participating in the QDII program eased their subscription restrictions, allowing larger investments or reopening to new subscriptions in response to global market fluctuations.

Broader Facilitation Measures

In a move to foster a more open and predictable investment environment, SAFE also introduced nine new foreign exchange measures in September 2025. These measures aim to streamline cross-border investment and financing processes, including easing property purchases for overseas individuals and simplifying domestic reinvestment by foreign-invested enterprises. Additionally, China is preparing to expand its cross-border Wealth Management Connect program beyond the Greater Bay Area, indicating a selective approach to opening up financial channels.