Using offshore structures in outbound investment

The numbers of Chinese enterprises engaging in foreign investment has been increasing in recent years. This can be attributed to the central government’s “Going Out” strategy, which encourages domestic enterprises to invest in overseas expansion, and is also driven by the need for enterprises to globalize services.

Among the plethora of completed Chinese outbound investments, a significant number have been completed via an offshore legal structure. This issue briefly addresses the main types of offshore structures used by Chinese enterprises in outbound investment, together with their core characteristics and other matters that need to be considered.

Offshore structures

As the name suggests, an offshore structure refers to the legal framework or structure applicable in a particular offshore jurisdiction. This may include corporations, partnerships and trusts. As a matter of practicality, it is commonly understood that an offshore jurisdiction refers to one that provides a financial hub and acts as a tax haven for non-resident entities. Popular offshore jurisdictions include the Cayman Islands, British Virgin Islands (BVI), Bahamas, Bermuda and the Republic of Seychelles.