Vietnamese Buyers Acquiring Chinese Partners: Risks, Structures

Vietnamese Companies Acquiring Chinese Partners: Risks and Structures

After years as contract manufacturers for Chinese partners, more Vietnamese enterprises are reversing course: acquiring those very Chinese partners to own technology, brands, distribution channels or remove intermediaries. A strategic leap — but also among the most complex deals, touching Vietnamese outbound investment law, Chinese M&A law and foreign exchange control simultaneously.

This article covers the legal framework, structural models and specific risks of "Vietnam buys China" deals.

Contents

• 1. Context: why Vietnamese firms buy Chinese partners
• 2. Vietnam's outbound investment framework
• 3. When an outbound investment registration certificate is required
• 4. Foreign exchange registration and outward remittance
• 5. Deal structures: common models
• 6. Specific risks in acquiring a Chinese company
• 7. Implementation checklist
• 8. Detailed Q&A
• 9. When to work with counsel

1. Context: why Vietnamese firms buy Chinese partners

Common drivers of "Vietnam buys China" deals: (1) buying technology and manufacturing capacity — owning factories and production lines in China instead of contract manufacturing; (2) buying brands and distribution — accessing the Chinese domestic market or export markets the partner holds; (3) supply-chain integration — removing intermediaries, controlling quality and timelines; (4) valuation opportunities — reasonably priced Chinese SMEs amid restructuring.

Whatever the driver, the immutable principle: a cross-border deal cannot be viewed from one side only. Success requires satisfying Vietnamese law (outbound investment, foreign exchange) and Chinese law (M&A, business registration, tax) at once.

2. Vietnam's outbound investment framework

The 2025 Investment Law (143/2025/QH15, effective 1 March 2026) encourages outbound investment with key novelties:

• Abolition of outbound investment policy approval — the biggest former administrative barrier is gone.
• Narrowed certificate scope: investors need an outbound investment registration certificate only in two cases — (i) projects meeting the Government's capital threshold, or (ii) projects in conditional outbound sectors under Article 41 (banking, insurance, securities, press, radio, television, real estate business).
• Issuing authority: the Ministry of Finance issues, adjusts and terminates outbound investment registration certificates (Article 42). For large-scale projects or those proposing special support mechanisms/policies, the Ministry of Finance must report to the Prime Minister before issuance or adjustment.
• Decree 103/2026/ND-CP (dated 31 March 2026) provides details, replacing relevant provisions of Decree 31/2021/ND-CP.

3. When an outbound investment registration certificate is required

Applied to acquiring a Chinese company:

• No certificate needed for projects with outbound investment capital below VND 7 billion outside conditional outbound sectors — under Decree 103/2026/ND-CP. Only foreign exchange registration with the State Bank is required. Note: the VND 7 billion threshold is quite low, suiting small deals in trade and services.
• Certificate required for capital of VND 7 billion or more, or projects in conditional sectors under Article 41 of the 2025 Investment Law — filed with the Ministry of Finance.
• Large/special-policy projects: prepare for the extra step of Ministry of Finance reporting to the Prime Minister.

Correct classification from the outset avoids two mistakes: redundant procedures wasting time, or missing procedures causing violations when remitting funds.

4. Foreign exchange registration and outward remittance

With or without an outbound investment registration certificate, outward money flows face foreign exchange control:

• Register foreign exchange transactions with the State Bank for the outbound investment project.
• Open and use an outbound investment capital account: all outward remittances and profit repatriation go through the registered account.
• Remit for the registered purpose and schedule: acquisition price under the transfer agreement, capital contributions per committed timelines.
• Profit repatriation: per foreign exchange rules; repatriated profits must link to audited results with tax obligations completed in the host country.

Foreign exchange violations — e.g., remitting through improper channels — risk administrative sanctions and, more importantly, can block future profit repatriation.

A practical point: the commercial bank holding the outbound capital account checks each payment order against the registered contents — the more detailed and clear the registration dossier (transfer agreement, payment schedule, capital use plan), the smoother the remittance. Engage the bank early to agree the document set for each remittance tranche, avoiding disbursement "jams" when SPA payment deadlines arrive.

5. Deal structures: common models

Three common structural models:

Model 1: direct share/equity purchase. The Vietnamese company directly signs to buy shares of the Chinese company. Pros: simple, fast. Cons: inherits all obligations and hidden debts of the target — demanding thorough due diligence.

Model 2: purchase via an SPV. Establish a special purpose vehicle (often in an intermediary jurisdiction such as Singapore or Hong Kong) for the deal. Pros: flexibility in capital structuring, fundraising and future transfers; treaty benefits. Cons: maintenance costs and rising substance requirements. With SPVs, note anti-transfer-pricing rules and the "place of effective management" principle in tax residence — a hollow SPV without real operations may be denied treaty benefits by both countries' tax authorities.

Model 3: asset deal instead of share deal. Buy selected assets, production lines and brands rather than the whole company. Pros: excludes unwanted debts and obligations. Cons: complex per-asset transfer procedures, possible asset-transfer taxes in China, and no automatic succession to the old company's licences and contracts.

Model choice follows due diligence results, commercial goals and overall tax structure — no one-size-fits-all "best" model.

6. Specific risks in acquiring a Chinese company

• Chinese legal risk: different legal system, business registration practice and compliance culture. Due diligence must be done on the ground by Chinese counsel: corporate legal status, land use rights, IP, tax debts, hidden disputes, environmental and labour compliance.
• Merger control and security review: depending on scale and sector, deals may face merger control filing or national security review in China. Skipping this can void the deal or trigger penalties.
• Cultural and post-merger management risk: language gaps, management culture differences, accounting systems. Many deals fail with "bought but cannot manage" for lack of a post-merger integration plan. Build the integration plan alongside negotiation: post-merger governance (who runs it, reporting lines), unified accounting and internal controls, HR policy and talent retention, and a 12–24 month cultural integration roadmap.
• Exchange-rate and policy risk: CNY/VND fluctuations and tax/foreign-exchange policy changes in both countries directly affect deal economics.
• Double-taxation risk: profits repatriated to Vietnam face tax in both countries unless the Vietnam–China DTA and foreign tax credit mechanisms are correctly applied.

7. Implementation checklist

1. Determine capital scale and sector → whether an outbound investment registration certificate is needed.
2. Obtain the certificate (if required) from the Ministry of Finance.
3. Register foreign exchange transactions with the State Bank; open the outbound capital account.
4. Legal, financial and tax due diligence on the Chinese target (Chinese counsel).
5. Review Chinese merger control / security review requirements.
6. Negotiate and sign the SPA — governing law, dispute resolution.
7. Complete shareholder-change procedures in China; remit payment through the registered account.
8. Post-merger integration plan: governance, accounting, HR, compliance.
9. Profit repatriation mechanics and tax filing.

8. Detailed Q&A

Does a Vietnamese company buying a Chinese company need Vietnamese approval? It depends on scale and sector. The 2025 Investment Law abolished approval of outbound investment policy. An outbound investment registration certificate is required only for projects meeting the Government's capital threshold or in conditional outbound sectors (Article 41). Small projects (under VND 7 billion, non-conditional) need only foreign exchange registration with the State Bank.

How is the VND 7 billion threshold understood? Under Decree 103/2026/ND-CP, projects with outbound investment capital below VND 7 billion and outside conditional outbound sectors need no outbound investment registration certificate — only foreign exchange registration. This new rule favours small deals.

Is remitting acquisition funds to China difficult? Remittance must follow foreign exchange rules: register foreign exchange transactions with the State Bank, remit through the registered outbound investment capital account, for the registered purpose and schedule. Non-compliant remittance risks sanctions and blocks future profit repatriation.

What does the Chinese side require for an acquisition? Transactions must comply with Chinese law on shareholder changes and business registration, and may face merger control or national security review depending on scale and sector. Chinese counsel should coordinate local due diligence and filings.

Share deal or asset deal for the Chinese company? Each has trade-offs: a share deal is faster but inherits all rights and obligations (including hidden debts); an asset deal cherry-picks assets but transfer procedures are complex and may trigger taxes. The choice follows due diligence and commercial goals.

Are profits repatriated from China double-taxed? Vietnam and China have a double taxation avoidance agreement. Repatriated profits are taxed under the treaty and Vietnamese law; the enterprise credits taxes paid abroad, avoiding double taxation on the same income.

9. When to work with counsel

"Vietnam buys China" deals mandatorily need two coordinated counsel teams: Vietnamese counsel for outbound investment, foreign exchange and tax structuring; Chinese counsel for local due diligence and procedures. Counsel should join from valuation and deal structuring — not at SPA signing. FLAT Law Firm, with Vietnam–China transaction experience and a partner-firm network in China, can coordinate the entire deal from the Vietnamese side.

<div class="jpv-language-links" lang="en"> <p><strong>Language versions:</strong></p> <ul> <li><a href="https://flaw.vn/cong-ty-viet-nam-mua-lai-doi-tac-trung-quoc-rui-ro-va-cau-truc/">Bản tiếng Việt</a></li> <li><a href="https://flaw.vn/zh/yue-nan-gong-si-shou-gou-zhong-guo-he-zuo-huo-ban-feng-xian-yu-jiao-yi-jie-gou/">中文版</a></li> </ul> </div>