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What are the key points of China's national security review for foreign investment?

Drawing from over a decade of experience in handling such issues, Xu Baotong's legal team shares the following.

 

 

In December 2020, the National Development and Reform Commission (NDRC) and the Ministry of Commerce issued the "Measures for the Review of Foreign Investment in relation to National Security," which provided comprehensive regulations on the system of national security review of foreign investment, including the types of foreign investment subject to review, the scope of review, declaration procedures, review procedures, review decisions, supervision mechanisms, and penalty mechanisms.

 

According to these regulations, the scope of the national security review of foreign investment includes:

 

Investment in sectors related to national defense security such as military industry, military support, as well as investments in military facilities and areas surrounding military facilities.

 

Investment in nine important areas related to national security (important agricultural products, important energy and resources, major equipment manufacturing, important infrastructure, important transportation services, important cultural products and services, important information technology and internet products and services, important financial services, and key technologies), as well as other important sectors where actual control of the invested enterprise is obtained.

 

For investments in the latter category that are related to important areas of national security, it is also required to obtain actual control of the invested enterprise. Specifically, this includes:

 

Foreign investors holding more than 50% of the shares in the enterprise.

Foreign investors holding less than 50% of the shares in the enterprise, but their voting rights are sufficient to significantly influence the resolutions of the board of directors, shareholders' meeting, or general meeting of shareholders.

Other circumstances where foreign investors are able to significantly influence the enterprise's decision-making in management, personnel, finance, technology, etc.


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