China’s outward investment policy has attracted attention not only for policy reasons, but also in academic debate on the role of source-country institutions in foreign investment. Formal institutions in the form of government policy and regulations have been central to China’s outward investment. This paper is based on a detailed analysis of Chinese policy and regulatory documents, which provide evidence of the motivations, substance and outcomes of investment policy. The paper argues that the factors determining investment policy are complex and evolving, and that elements of the policy may not be coherent and can be conflicting. It also argues that unintended outcomes are frequent, and that enterprises, including state-owned enterprises, attempt to escape the constraints of government policy and regulation. Thus, the relationship between institutions in China and enterprise behaviour is complex, and is not simply one of restriction or promotion of outward investment.