SAFE: Direct Investment Items Are Basically Fully Convertible
nashnova research
SAFE deputy head Li Bin said on Sept 10 that China's direct-investment account is now largely convertible, while portfolio investment and cross-border financing remain under managed, gradual liberalization — the capital-account door is open a crack, not all the way.
What does "largely convertible" actually mean?
Largely convertible — when foreign capital flows in or out of China for direct investment, most transactions no longer need case-by-case approval. This is the most open segment of China's capital account today.
This means → FX conversion restrictions on foreign direct investment have dropped to a low level; the friction cost of moving money across borders for real-economy deals is shrinking.
Portfolio investment and cross-border financing have not kept pace: the former runs through qualified-investor schemes, Stock / Bond Connect, and direct market access; the latter stays under macro-prudential controls.
In plain terms = money for building factories flows largely freely; money for trading stocks or issuing bonds still queues at a managed gate.
What will the 15th Five-Year Plan change? Three reform tracks
Direct investment track: simplify FDI registration, shorten the negative list for fund usage, roll out new facilitation measures — the goal is smoother two-way flow, both inbound and outbound.
Cross-border financing track: focus on easier offshore borrowing for tech firms, expand green-bond FX pilot zones, and upgrade multinational companies' cross-currency cash-pooling schemes.
Portfolio investment track: widen primary-market access for securities issuance, align trading rules with international standards, and consolidate channels.
This means → the three tracks move at different speeds — direct investment is fastest, financing is in the middle, and portfolio access still centers on "institutional alignment," the furthest from full opening.
How big is the balance-of-payments base?
In 2025, China's cross-border receipts and payments hit $15.6 trillion; FX market turnover reached $42.6 trillion — up 80% and 42% respectively from 2020. FX reserves remain the world's largest.
In H1 2026, cross-border trade flows grew 16% year-on-year; total inbound investment stock neared $8 trillion, and foreign investors' share of RMB-denominated securities rose to 30%.
This reflects a steadily expanding flow base and rising foreign allocation to RMB assets — a large enough platform to support gradual liberalization.
How will risks be managed? Free flow does not mean no guardrails
Li Bin flagged three external variables: protectionism, geopolitical conflict, and global financial-market volatility.
SAFE's framework is a "macro-prudential + micro-supervision" twin pillar, aimed at preventing systemic risk from abrupt surges or withdrawals of cross-border capital.
In plain terms = the door can open, but there is a flow sensor at the threshold — if money suddenly floods in or rushes out, regulators will hit the brake.
For foreign investors, what is the real uncertainty?
"Largely convertible" direct investment is a statement at the institutional level, but whether foreign capital actually increases depends on how aggressively the negative list is cut and how fast those cuts land.
This means → FX convertibility is a necessary condition, not a sufficient one — if market-access restrictions stay, money can be converted but has nowhere to go, and the real impact of opening shrinks.
This reflects the core tension in the current policy signal: the institutional framework is loosening faster, but actual market-access openings still have to be negotiated step by step.
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