The central government will soon provide relief for venture capitalists and investment bankers affected by foreign exchange regulations released earlier in the year. Five government ministries and departments are expected to announce joint regulations clarifying State Administration of Foreign Exchange (SAFE) circulars released in January and April that essentially closed the door temporarily to foreign venture capital investment. 'We think the new regulations will come out [this month or next],' said Chen Gongmeng, director of the China Venture Capital Research Institute. 'We hope so, because the venture capital business in China has been hit significantly since the beginning of the year.' SAFE is working on the new regulations in co-operation with the Ministry of Commerce, the National Development and Reform Commission, the Tax Bureau and the State Administration of Industry and Commerce, according to Waikit Lau, a partner at venture capital firm Gobi Partners. Circulars 11 and 29 require mainland residents to gain SAFE approval before establishing offshore firms to conduct mergers and acquisitions in China. SAFE officials said the restrictions were aimed at blocking asset-stripping by officials of state-owned enterprises but had the unintended side-effect of hurting venture capital, private equity and investment banking businesses. 'In China, there is a lot of illegal practice and so-called asset-stripping, where management substantially undervalues a company's assets and uses mergers and acquisitions to transfer them offshore,' said Mr Lau. 'There is also money from corrupt practices leaving through this route and then coming back into China.' But the favoured investment method for venture capital in China is for a Chinese firm to set up an offshore entity that is subject to international laws and eventually can be listed on offshore markets. The SAFE circulars essentially closed the main exit for venture capital by introducing approval requirements without establishing an approval process.