Measures on National Security Review of Foreign Investment
19 Dec 2020
On December 19, 2020, China's National Development and Reform Commission and Ministry of Commerce jointly issued the Measures on Security Review of Foreign Investment. The Measures will take effect on 18 January 2021.
Broadly speaking, the Measures mandate pre-closing filings, and authorize the "Foreign Investment Security Review Working Mechanism" to review certain foreign investments in various "covered sectors".
The Measures provide that the review requirements apply to foreign investments in the following sectors:
- investments in "military, military support and other sectors related to national defense and security," as well as investments in proximity to military facilities and military industrial facilities;
- investments in the sectors below that would result in foreign investors obtaining “actual control” over the domestic enterprises they invest in: important agricultural products; important energy and resources; major equipment manufacturing; important infrastructures; important transportation services; important cultural products and services; important information technology and Internet/online products and services; important financial services, critical technologies; and other important sectors/areas.
Additionally, the term "actual control" is defined to include any of the following circumstances:
- foreign investor(s) holds more than 50% of the equity interests in an enterprise;
- foreign investor(s) holds less than 50% of the equity interests in an enterprise, but its voting rights may exert significant influence on the resolutions of the board or the shareholders' meeting; and
- other circumstances that enable foreign investor(s) to exert significant influence on the decision-making of the enterprise with regard to "business operations, personnel, finance and technology."
For covered investments, foreign investors or relevant stakeholders in China are required to file for the security review and wait for the result of review prior to implementing their investments.
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Type:
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Entry and establishment (Approval and admission)
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Industry:
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Primary (Agriculture, forestry and fishing, Mining and quarrying)
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Manufacturing (Manufacture of coke and refined petroleum products, Manufacture of machinery and equipment n.e.c., Manufacture of transport equipment)
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Services (Electricity, gas, steam and air conditioning supply, Transportation and storage, Telecommunications, Financial and insurance activities, Arts, entertainment and recreation)
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Sources:
