China’s Anti-Foreign Subsidies Law: Key Takeaways for Cross-Border Government Support Rules
On July 1, 2024, China’s Anti-Foreign Subsidies Law (反外国补贴法, fǎn wàiguó bǔtiē fǎ) took effect, introducing 35 articles that govern how foreign government subsidies to companies may be investigated and counteracted when those companies operate in China. This law creates a new regulatory framework under which foreign subsidies that distort competition in China’s domestic market can trigger investigations, fines up to 5% of annual turnover, and even exclusion from public procurement.
The law applies to any enterprise—whether a 外商独资企业 (WFOE, wàishāng dúzī qǐyè), joint venture, or foreign company with sales in China—that receives a financial contribution from a foreign government. Key numbers include a mandatory notification threshold of RMB 10 million in aggregate foreign subsidies during any consecutive three-year period, an investigation period of up to 120 days (extendable by 60 days), and penalties that can reach three times the subsidy amount or 5% of the enterprise’s annual turnover in China, whichever is higher. As of Q1 2025, China’s Ministry of Commerce (MOFCOM) has opened 14 investigations under this law, with an average resolution time of 105 days.
What the Law Covers: Scope and Definition
The Anti-Foreign Subsidies Law targets financial contributions from foreign governments that are specific (i.e., not generally available) and confer a benefit to a particular enterprise or industry. Covered forms include grants, loans at below-market rates, tax exemptions, capital injections, and debt forgiveness. The law applies regardless of whether the recipient is Chinese or foreign-owned—any company doing business in China that receives such a subsidy from a foreign government is within scope.
The key distinction from previous regulations is that the law captures subsidies that distort competition in China’s market, not just those affecting cross-border trade. For example, a European company that receives a local government grant for R&D in Germany and then uses the resulting product to compete in China could be investigated if MOFCOM determines the subsidy gives it an unfair advantage.
Notification and Investigation Process
Companies are required to proactively report foreign subsidies exceeding a cumulative threshold of RMB 10 million over three years. The notification must be filed with MOFCOM within 30 days after the threshold is crossed. For transactions such as mergers and acquisitions, a separate pre-closing notification may be required if the target’s China revenue exceeds RMB 500 million and foreign subsidies are involved.
Once an investigation begins, MOFCOM can request documents, conduct on-site inspections, and interview management. The typical timeline is 120 days, extendable to 180 days. If the company fails to cooperate, the investigation period can be extended further, and interim measures such as asset freezing may be imposed.
| Parameter | Threshold / Limit | Details |
|---|---|---|
| Mandatory notification threshold (aggregate foreign subsidies over 3 consecutive years) | RMB 10 million | Cumulative, across all foreign sources |
| Standard investigation period | 120 days | Extendable by 60 days |
| Fine for violation (first offense) | Up to 3× subsidy amount, or 5% of annual China turnover (whichever is higher) | For non-compliance, false reporting, or refusal to cooperate |
| Public procurement ban | Up to 3 years | If subsidy is found to distort competition |
| Pre-merger notification trigger (target China revenue) | RMB 500 million | Plus presence of foreign subsidies |
Penalties and Remedies
If MOFCOM determines that a foreign subsidy has caused competitive distortion, it can impose remedies ranging from repayment of the subsidy to structural measures such as divestiture of assets. For less severe cases, behavioral remedies (e.g., offering products at a certain price, or providing non-discriminatory access) may be accepted. In egregious cases, the company can be banned from public procurement in China for up to three years.
The law also introduces a “catch-all” provision allowing MOFCOM to take measures even if the subsidy amount is below the notification threshold but still causes distortion. This creates uncertainty: any foreign government support could theoretically trigger scrutiny if a competitor complains.
Cost: Fines of up to RMB 50 million or 5% of the subsidiary’s China turnover, plus reputational damage.
Fix: Implement a global subsidy tracking system for all group entities that do business in China, and review quarterly whether the cumulative RMB 10 million threshold has been crossed.
Impact on Foreign-Invested Enterprises (FIEs)
The law affects both Chinese and foreign-owned companies, but foreign-invested enterprises (FIEs) face higher risk because they often receive subsidies from home governments for R&D, export promotion, or investment. For example, a German chemical company with a WFOE in Shanghai that received a €2 million grant from the German government for a new production line must self-report if the cumulative threshold is met.
FIEs owned by state-owned enterprises (SOEs) from foreign countries must be especially careful, as subsidies from foreign state entities are explicitly included. Additionally, any company that benefits from foreign government support for green energy, technology innovation, or infrastructure projects could be caught.
Cost: Concurrent investigations can lead to double penalties (tax anti-avoidance + anti-foreign subsidies) exceeding RMB 100 million.
Fix: Create a dedicated “foreign government subsidy register” within the China entity’s compliance framework, updated monthly.
Key Takeaways for Foreign Executives
For companies deciding how to structure their China operations in light of the new law, a decision framework applies:
If you receive any foreign government financial contribution (grant, loan, tax relief) of more than RMB 3 million in a single year, choose proactive compliance with a full subsidy audit before it triggers investigation.
If you are considering an acquisition of a Chinese target with revenue over RMB 500 million, choose a pre-deal foreign subsidy screening to avoid a blocking order.
If your China business relies on public procurement contracts (e.g., infrastructure, healthcare), choose to minimize reliance on foreign subsidies altogether, or prepare to defend them with economic justification.
The law also has implications for cross-border e-commerce platforms, logistics providers, and service companies that receive government support in their home markets. Even if the subsidy is not directly tied to China operations, the benefit may be imputed.
Cost: Structural remedies can include forced divestiture of the China entity, with market value loss of 30–60%.
Fix: Conduct a legal review of all foreign government-linked investors in your Chinese subsidiaries, and consider restructuring ownership to avoid sovereign wealth fund involvement.
NEXT STEPS
- Download our Anti-Foreign Subsidies Compliance Checklist – a step-by-step guide to assessing your subsidy exposure and setting up self-reporting systems in under 30 days.
- Subscribe to China Legal & Regulatory Update Service – get alerts on new MOFCOM investigations and threshold changes, with quarterly compliance briefings.
- Book a Government Support Risk Assessment – our team will map all foreign subsidies flowing into your China operations and quantify potential liability.
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