Getting your cash back

Author: | Published: 1 Mar 2009

With global credit markets remaining tight and China's economy slowing, foreign investors may need to access some of the money they have invested in China. However, China's foreign exchange regime includes a number of restrictions to safeguard China from sudden large-scale withdrawals of capital. Repatriation of dividends and royalties is relatively straightforward but China's foreign investment regime also includes a number of limitations on foreign investors' ability to reduce investment capital. Foreign investors that do not withdraw capital in accordance with the rules may have unlimited liability for the debts of their investment enterprises in China.

The combination of foreign exchange controls, limits on capital reduction and the possibility of unlimited liability mean that foreign investors must be careful when drawing on investments in China for funding purposes elsewhere.

Trapped cash China's currency, the renminbi (Rmb), is not fully convertible; strict controls prevent the conversion of capital account items without the...