The security review for foreign investment which affects or may affect national security is well-known as an international customary practice. Under the needs of the promotion for foreign investment and the protection for national security to form a brand-new style of opening-up, National Development and Reform Commission and Ministry of Commerce published this Measure for the Security Review of Foreign Investment based on the Foreign Investment Law of the People's Republic of China and the National Security Law of the People's Republic of China on December 19th.
As a result of this publication, the security review system for foreign investment in China would be improved and it will be a positive balance between economic profit and national security. Detailed regulations could be divided in six main statements as follow:
- Special institution. The State would establish a new mechanism for this security review. National Development and Reform Commission and Ministry of Commerce would be leaders and take responsibility for the daily works.
- Range of investment. Foreign investments which include: 1) national security as military and relevant industries, and investment that would be set around military facility and military area; 2) significant agricultural product, energy and resource, equipment manufacture, infrastructure, transportation, cultural product and service, information technology, Internet product and service, financial service and also key technology which relates to national security, and take the actual controlling right of the invested enterprise.
- Report mechanism. Foreign investor or domestic relevant person shall report the investment which is in the range of the security review before its implementation. For the investment that shall be declared but didn’t declare, it would be required to report the investment in a limited period of time.
- Progress and time limitation. Pre-review shall be determined within 15 working days, common review within 30 working days and special review within 60 working days. Before any review decision is made, the investment or relative project shall not be implemented. During the review period, relevant person may revise the investment plan or withdraw the investment.
- Decision and implementation. For the investment that passes the security review, it could be further implemented. If the pass of review is attached with condition, it shall be implemented under the specific given condition. For the investment that shall be prohibited to invest, it must definitely not be invested.
- Punishment. If the investor refuses to report the investment, deceives or doesn’t fulfill the attached condition, it may be ordered to dispose of the share or asset within a time limit, and the bad credit record may also be incorporated into the relevant credit information system of the state and subject to joint punishment.
This Measure would be effective 30 days after the publication.
If you want to read the complete article, you can refer to the below link (in Chinese only): http://images.mofcom.gov.cn/wzs/202012/20201219160625241.pdf
If you have any question, please contact me.
Mr. Mike Chang (Partner)