What is the scope of use of capital fund injected by overseas shareholders?

After overseas shareholders inject capital fund to a company in China, what purposes can the capital fund be used for? According to the regulation of the State Administration of Foreign Exchange (Huifa [2015] No. 19), all expenditures related to the company’s business scope can be used via capital fund, specifically includes: payment for goods, payment for projects, payment of deposits, payment of consulting fees, payment of other service fees, advance payment, payment of taxes, payment of wages and other labor remuneration, land transfer fee, house purchase, and purchases Fixed assets, equity investment, refund bank loans, petty cash, purchase of bank capital-guaranteed investment products, financial leasing, guarantee performance fee, small loans, factoring business, and others. However, it shall not be used directly or indirectly for expenditures outside the business scope of the enterprise or prohibited by laws and regulations; unless otherwise expressly provided, it shall not be used directly or indirectly for securities investment or other investment and financial management other than bank capital-guaranteed products; Loans to non-affiliated enterprises (except scope of business clearly permits ), shall not be used for the construction or purchase non-own-use real estate (except for real estate enterprises); if there is a contractual agreement between the domestic institution and other parties have agreement on the capital fund use scope, shall not beyond the scope.

According to the provisions of the State Administration of Foreign Exchange Huifa [2019] No. 28, the capital fund can be used for domestic equity investment, except the equity of the enterprises belong to negative list that is not allowed for foreign investor.

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