China outbound deals facing no respite from SAFE scrutiny, advisors say

5 October 2016 – China’s forex regulator is showing no signs of relaxing its scrutiny of outbound transactions, said three legal advisory sources close to M&A deals that require the regulator’s clearance. If anything, the evidence suggests the State Administration of Foreign Exchange (SAFE) approval process has become more stringent, two of them added.

While there is no suggestion SAFE, which emerged as a key timetable risk for Chinese outbound deals after February, is seeking to stop genuine transactions, officials at the PRC agency have in recent weeks been asking increasingly tougher questions regarding RMB funded outbound M&A deals, said two of the sources.

In at least one recent incident, officials asked for proof that deal documentation was genuine, said one. It’s not easy to respond to questions such as “how can we be sure that you have not faked this agreement?” said the source.