China’s New Outbound Investment Regulations: Implications for Critical Minerals Companies

On May 5, 2026, China’s State Council issued National Order No. 837, “Regulations on Outbound Investment,” released publicly on June 1 and set to enter into force on July 1. The regulations establish a comprehensive framework governing overseas investment by Chinese investors, reflecting a marked shift toward a more security-driven and coordinated approach to outbound capital. The framework integrates export control restrictions into outbound investment activity, authorizes responsive measures to foreign investment barriers, and creates a basis for countermeasures against foreign governments or entities that discriminate against Chinese investors. The regime is supported by robust enforcement tools, including orders to unwind investments and significant monetary penalties. For participants in the critical minerals and mining space, these developments introduce additional layers of regulatory and geopolitical risk. Projects involving Chinese investors, financing or technical participation will require more intensive diligence and ongoing monitoring.

At a Glance

• Export Controls Embedded in Outbound Investment: Investors are prohibited from exporting or using goods, technologies, services or data subject to Chinese export prohibitions in connection with overseas investment activity, with authorization required for restricted items. The restriction extends to personnel deployment, cross-border technical guidance and training arrangements.
• Government Response to Foreign Investment Barriers: Chinese authorities may conduct formal investigations into trade-related barriers or discriminatory investment conditions encountered by Chinese investors abroad, and may take responsive measures, including adjustments to outbound investment policy or restrictions on trade and services.
• Countermeasures and Retaliatory Authority: The State Council may adopt broad countermeasures against foreign governments, organizations or individuals that restrict Chinese investment or otherwise harm Chinese interests, with available measures affecting trade, investment, commercial cooperation and entry.
• Overseas Investment Security Review: The regulations establish a security review mechanism for outbound investments and related asset and equity transfers that affect or may affect national security, with mandatory cooperation obligations and compliance with review decisions required of all relevant parties.
• Enforcement and Penalties: Authorities may order the cessation of noncompliant investments, require disposal of equity interests or assets, and confiscate unlawful gains. Monetary penalties may reach up to 10% of the investment amount. Serious noncompliance may result in multiyear restrictions on future outbound investment activity.

Key Provisions

Scope and Definitions

Article 2 defines the jurisdictional scope of the regulations. The provisions apply to overseas investments made by investors within the territory of China.

• “Outward investment” covers activities in which investors directly or indirectly acquire ownership, control, management rights or other related rights in enterprises or assets in other countries or regions, whether through contributing assets or equity or by providing financing or guarantees.
• “Investors” encompasses enterprises, other organizations and resident individuals within China.

Export Controls and Technology Transfer

Article 13 embeds China’s export control regime directly into outbound investment activity. Investors may not export or use goods, technologies, services or related data that are subject to export prohibitions and must obtain authorization for items subject to export restrictions. Critically, the scope of this provision extends beyond physical exports to the cross-border transfer of technical know-how through personnel deployment, the organization of personnel to work abroad, the provision of cross-border technical guidance and the arrangement of cross-border training.

For projects involving Chinese partners in technology-intensive sectors, this raises the prospect that key technical contributions may require regulatory clearance or may not be transferable at all.

Overseas Investment Security Review

Article 15 establishes a security review mechanism for outbound investments and related asset and equity transfers that affect or may affect national security. The investment and commerce departments of the State Council, together with other relevant departments, are responsible for conducting such reviews. Relevant organizations and individuals are required to assist and cooperate, may not refuse or obstruct reviews, and must comply with the resulting decisions. Noncompliance carries penalties including fines, forced cessation of investment activity and multiyear bars on future outbound investment.

Article 15’s security review mechanism is broadly similar in structure to the U.S. outbound investment screening program established by Executive Order 14105 and implemented by Treasury Department regulations that took effect in January 2025. Both regimes subject outbound investment in sensitive sectors to government review on national security grounds, reflecting a common policy judgment that outbound capital flows can themselves pose national security risks. For cross-border transactions involving participants on both sides of the U.S.-China relationship, this raises the prospect of parallel and potentially conflicting review processes, each evaluating the same transaction against the national security interests of a different government.

Government Response to Foreign Investment Barriers

Article 23 authorizes Chinese authorities to respond to trade-related investment barriers or discriminatory investment conditions encountered by Chinese investors abroad. The Ministry of Commerce (MOFCOM) may conduct formal investigations, either independently or jointly with other relevant State Council departments. Based on investigation results, relevant departments may take responsive measures, including adjustments to country-specific investment policies or restrictions on the import and export of goods, technologies or international trade in services.

In sectors where foreign investment screening has intensified, such as mining, natural resources and critical minerals, this provision creates the possibility of policy responses that may affect project financing, ownership structures or operational arrangements.

Countermeasures and Retaliatory Authority

Articles 24 and 25 establish a broad legal basis for China to adopt countermeasures against foreign governments, organizations or individuals that impose discriminatory restrictions on Chinese investment or otherwise harm Chinese interests. Article 24 authorizes the Chinese government to take corresponding measures when any country or international organization “violates international law or the basic norms of international relations” by imposing discriminatory prohibitions or restrictions against China in investment or business operations. Pursuant to the Anti-Foreign Sanctions Law and its implementing provisions, relevant State Council departments may also designate organizations or individuals that participate in the formulation, decision-making or implementation of such measures to a countermeasures list.

Article 25 extends this authority to foreign organizations or individuals that engage in the following actions:

• Endanger China’s national sovereignty, security or development interests;
• Disrupt normal transactions with Chinese enterprises or individuals on discriminatory terms; and
• Unreasonably deprive investors of their legitimate rights and interests in overseas investments.

Available countermeasures include prohibitions or restrictions on import and export activities related to China, investment in China, transactions or cooperation with Chinese organizations or individuals, and the entry of relevant personnel, products and means of transport. Such measures may extend to organizations actually controlled or participated in by the designated foreign parties, creating potential exposure across corporate structures.

Cross-Border Data and Disclosure Obligations

Article 22 governs the obligations of organizations and individuals in China who, in connection with overseas investment arbitration, litigation or foreign law enforcement investigations, are required to provide evidence or materials to overseas entities. Such parties must comply with Chinese laws and regulations on the protection of state secrets, data security, personal information protection, technology export management, export control and judicial assistance, and must follow the required legal procedures where permission from a competent authority is necessary. Because the provision applies on a territorial rather than nationality basis, this disclosure obligation extends to foreign companies and individuals operating through subsidiaries or residing in China. This provision sharpens an existing conflict-of-laws tension for entities simultaneously subject to foreign discovery or disclosure requirements and Chinese data, security and technology restrictions.

Enforcement and Penalties

Article 27 establishes the principal enforcement mechanisms. Investors who engage in prohibited outbound investment may be ordered to cease activity, dispose of shares and assets within a specified period, and have unlawful gains confiscated, with monetary fines ranging from 0.5% to 10% of the investment amount depending on the nature of the violation. Directly responsible supervisors and personnel face additional individual fines of 20,000 to 100,000 yuan. From the effective date of a penalty decision, relevant authorities may refuse to accept applications for approval or filing by the violator for up to three years or prohibit the violator from engaging in outbound investment activity for a period of one to three years.

Implications

Order No. 837 provides Beijing with a comprehensive legal framework to regulate the full lifecycle of outbound investment by Chinese investors, from pre-investment approval and filing through ongoing compliance and enforcement. No designations or countermeasures have been activated as of the date of promulgation, and the practical reach of the framework will depend on State Council-level decisions shaped by the trajectory of bilateral trade and investment relations.

Companies operating in the lithium and broader battery materials sector are particularly exposed to these developments. The sector’s strategic importance, combined with its reliance on cross-border partnerships and technology sharing, places it squarely within the regulatory focus of both Chinese authorities and foreign investment screening regimes. Projects often involve joint ventures with Chinese investors, access to Chinese processing capacity or reliance on Chinese technical expertise. As a result, even companies headquartered outside China may face indirect exposure through their counterparties and supply chain relationships.

Order No. 837 should be read alongside National Order No. 835, “Regulations on Anti-Undue Extraterritorial Jurisdiction by Foreign Countries,” issued by the State Council on April 7. The two orders are complementary and reinforce a common theme: compliance with foreign regulatory requirements may itself become a source of legal risk in China. Order No. 835 prohibits Chinese entities from complying with foreign regulatory measures such as U.S. export controls or investment restrictions that Beijing designates as impermissible extraterritorial interference. Order No. 837, issued one month later, establishes the broader framework within which Chinese outbound investment operates and provides Beijing with tools to respond when foreign governments or companies restrict or discriminate against Chinese investors abroad. The practical consequence for multinational companies is a growing conflict between competing legal obligations: foreign regulatory requirements that must be met under one jurisdiction may constitute prohibited conduct under the other, while the governments enforcing those requirements risk becoming targets of Chinese countermeasures.

Next Steps

In the wake of Order No. 837, companies with Chinese partners, investors or business relationships should assess their exposure and consider proactive steps to manage compliance risk. Brownstein stands ready to help impacted companies navigate this emerging landscape, including:

• Evaluating whether proposed or existing investments involve technologies, data or services subject to Chinese export controls under Article 13, with particular attention to processing technologies, technical personnel arrangements and cross-border data flows;
• Assessing exposure to Chinese partners and financing sources in joint ventures and offtake arrangements, considering the countermeasures framework of Articles 24 and 25;
• Reviewing transaction documentation to ensure risks associated with regulatory change, countermeasures and potential divestment are appropriately allocated, including through termination rights, force majeure provisions and specific compliance undertakings;
• Analyzing conflict-of-laws exposure for entities subject to both foreign discovery or disclosure obligations and the data, security and technology restrictions implicated by Article 22; and
• Developing governance processes to monitor regulatory developments and assess their potential impact on existing investments on an ongoing basis.

For additional insights into the status of U.S.-China relations or assistance in navigating this rapidly evolving regulatory environment, please contact a member of the Brownstein team.

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