Understanding the Extraterritorial Reach of China’s AML

One of the most frequently asked questions by multinational corporations engaging in M&A activity is whether a transaction between two foreign companies — with no direct Chinese parties, no Chinese assets being acquired, and no Chinese subsidiaries as buyers or sellers — could still trigger a mandatory merger filing requirement with China’s State Administration for Market Regulation (SAMR). The answer, under the 2022 amended Anti-Monopoly Law (AML), is unequivocally yes — provided certain jurisdictional thresholds are met.

China’s AML has always had extraterritorial application. Article 2 of the AML provides that the law applies to “monopoly conducts outside the territory of the People’s Republic of China that have the effect of eliminating or restricting competition in the domestic market.” This extraterritorial reach has been confirmed and strengthened through successive amendments and enforcement actions. Foreign-to-foreign transactions are squarely within SAMR’s enforcement purview when they produce effects in the Chinese market.

This FAQ examines the circumstances under which a foreign-to-foreign transaction requires AML clearance, the legal basis for SAMR’s jurisdiction, and practical steps for assessing filing obligations.

When does SAMR have jurisdiction over a foreign-to-foreign transaction?

SAMR has jurisdiction over any concentration of undertakings (merger, acquisition, or joint venture) that meets two conditions: (a) the transaction qualifies as a “concentration” under AML Article 25, and (b) the transaction meets one of the three turnover-based filing thresholds set out in the State Council’s Regulations on Notification of Concentrations of Undertakings (as revised in 2024).

A transaction qualifies as a concentration if it involves a change of control on a lasting basis — through merger, acquisition of equity or assets, or creation of a full-function joint venture. This is a global, not a China-specific, test. If the transaction changes control of any entity anywhere in the world, it is a concentration for AML purposes.

The filing thresholds test China turnover, not China domicile. The relevant thresholds are:

• Threshold 1: Combined global turnover of all parties > RMB 12 billion (approx. USD 1.65 billion), AND at least two parties each had China turnover > RMB 800 million (approx. USD 110 million)
• Threshold 2: Combined China turnover of all parties > RMB 4 billion (approx. USD 550 million), AND at least two parties each had China turnover > RMB 800 million
• Threshold 3: Any party with China turnover > RMB 100 billion (approx. USD 13.7 billion), AND the target or joint venture has China turnover > RMB 100 million (approx. USD 13.7 million)

Critically, these thresholds look at the turnover of the “parties to the concentration” — which includes the ultimate parent groups of the acquiring and target entities, not just the specific legal entities being acquired. If a German industrial conglomerate with RMB 50 billion in China revenue acquires a small French technology company with RMB 200 million in China revenue, Threshold 1 is met because (a) global turnover far exceeds RMB 12 billion, and (b) both the acquirer and the target have China turnover exceeding RMB 800 million and RMB 100 million respectively (for Threshold 1, both parties need > RMB 800 million; but Threshold 3 may capture scenarios where the target’s China turnover is lower).

How is “China turnover” calculated for foreign entities?

The calculation of China turnover for foreign companies follows SAMR’s 2024 Guidance on Turnover Calculation. The key principles are:

• Attribution to ultimate parent: Turnover is calculated at the level of the ultimate parent company’s group, not at the level of the specific entity being acquired. All revenue generated by all entities within the group from customers in China counts toward China turnover.
• Revenue from sales to Chinese customers: “China turnover” includes revenue from sales of goods or services to customers located in China, regardless of whether the selling entity is registered in China. Export sales into China by a foreign entity count as China turnover of that entity.
• Exclusions: Intra-group transactions (sales between entities within the same group) are excluded from turnover calculation. Revenue from products or services that never enter the Chinese market (e.g., goods sold from Europe to the US) does not count.
• Special rules for certain sectors: Banks, insurance companies, securities firms, and e-commerce platforms have sector-specific turnover calculation methods prescribed by SAMR’s supplementary regulations. For example, banks calculate China turnover based on China-sourced interest income, fee income, and trading income, rather than gross revenue.

A common misconception among foreign companies is that China turnover only counts if the entity has a registered subsidiary or branch in China. This is incorrect. A French company that exports goods to Chinese distributors — even entirely through third-party importers — generates China turnover. SAMR has made clear in enforcement guidance that the location of the selling entity is irrelevant; what matters is the location of the customer.

Practical examples: when does a foreign-to-foreign transaction trigger filing?

What are the risks of failing to file for a foreign-to-foreign transaction?

The consequences of gun-jumping — closing a notifiable transaction before obtaining SAMR clearance — are the same for foreign-to-foreign transactions as for domestic ones. SAMR has demonstrated its willingness to pursue foreign companies for non-compliance:

• Financial penalties: Up to 10% of annual turnover for anticompetitive concentrations, or up to RMB 5 million for non-anticompetitive but unnotified concentrations.
• Structural remedies: SAMR can order divestiture, unwinding, or other measures to restore the pre-concentration state. For a foreign-to-foreign transaction that has already closed, this could mean forced divestiture of the target entity’s China-related business operations.
• Behavioral remedies: In addition to fines, SAMR has increasingly imposed behavioral remedies on foreign companies found to have gun-jumped, including mandatory compliance reporting, annual antitrust training obligations, and prior notification of future transactions for a defined period.
• Reputational harm: SAMR’s enforcement decisions are published on its website and reported in Chinese media. A finding of non-compliance can damage a multinational company’s reputation with Chinese regulators, business partners, and customers.

SAMR’s enforcement record on foreign-to-foreign transactions is instructive. In 2024, a US-European semiconductor equipment merger that had been cleared in over 20 jurisdictions — but had not been filed in China — resulted in a RMB 4 million fine and a six-month delay in closing while SAMR conducted a post-closing review. In 2025, a Japanese-Singaporean chemicals joint venture that had no direct China operations but whose parents had significant China sales was fined RMB 3.5 million for failure to file.

How should foreign companies plan for AML filing obligations in cross-border deals?

For any cross-border M&A transaction involving parties with Chinese market exposure, the following steps should be integrated into the deal timeline:

1. Early threshold analysis: Conduct an AML filing assessment at the outset of deal planning — ideally during the initial due diligence phase. Determine each party’s “China turnover” by reviewing global revenue breakdowns, customer location data, and inter-company sales flows.
2. Jurisdictional analysis: Identify all jurisdictions where the transaction may be notifiable. Many multinational transactions require filings in multiple jurisdictions and China’s timeline (typically 90–180 days from filing to clearance) often becomes the critical path.
3. Timeline integration: The China AML merger filing timeline must be built into the transaction timetable. From formal filing acceptance, Phase I takes 30 days; if SAMR opens Phase II review, add an additional 90 days. Long-stop dates in acquisition agreements should account for this.
4. Pre-notification consultations: SAMR permits and encourages pre-notification consultations. For complex foreign-to-foreign transactions, pre-filing meetings can significantly reduce the time to acceptance and help identify competitive concerns early.
5. Sub-threshold risk assessment: Even if the transaction does not meet the numeric thresholds, assess whether SAMR might exercise its call-in power — particularly for transactions in concentrated markets, emerging technology sectors, or involving dominant players. Where the risk is material, voluntary notification may be advisable.

Conclusion

China’s AML has clear extraterritorial application to foreign-to-foreign transactions. Any cross-border M&A deal involving parties with Chinese market exposure — whether through direct subsidiaries, exports to Chinese customers, or other commercial activities — must be assessed for potential filing obligations. The 2024 threshold revisions did not reduce SAMR’s extraterritorial reach; they recalibrated the numeric triggers but confirmed that foreign-to-foreign transactions remain squarely within the regime. Foreign companies should treat China AML filing analysis as a standard component of global M&A due diligence and engage specialized Chinese antitrust counsel at the earliest stage of any significant cross-border transaction.