(Yicai Global) Oct. 22 -- The State Administration of Foreign Exchange has canceled limits on foreign direct investment prepayments and account validity terms.

FDI upfront costs are no longer capped at USD300,000and investors can transfer and use these funds at need. Accounts used for their disbursements are also no longer limited to six months, but their terms can now be determined based on specific transactions.

SAFE recently revised these standards that came out in 2012 and 2013 to lure foreign investors through greater convenience and toimprove China's business environment.

Investors will be able to arrange fees for inspections and studies based on their actual needs and research investments more freely and conveniently after the reform, which will help to usher in more cooperative projects and attract more foreign investment into China, said SAFE spokeswoman Wang Chunying.

Most foreign investors' research, inspections and studies generate preparatory costs before their actual investment, and some need to transfer capital and settle foreign exchange as a result. SAFE allows overseas investors to set up upfront cost accounts, transfer funds and conduct exchange settlement as required to meet their needs, Yicai Global has learned.

Front-end cash accounts are non-residential ones foreign investors set up, with the receipt of planned capital via those accounts not registered with relevant domestic agencies.

"Examination of upfront capital will be smoother, as will studies and research after revocation of the USD300,000 limit in the pre-payment reform, and this will therefore attract more foreign investors and more high-quality projects to China, and provide funding and technological support for development," Wang said.

Reform must proceed in tandem with regulation, however, Wang added, saying SAFE will focus on the authenticity and compliance of the movement of these front-end expenses to remove all obstacles for genuine investors, while also preventing arbitrage funds from entering and leaving.

China's outbound direct investment climbed to second place in the globe by the end of last year, second only to the US. The country's FDI actually attracted by China's non-financial sectors last year reached USD131 billion, in annual 4 percent growth, Ministry of Commerce data show.

Editor: Ben Armour