The Chinese government conducts security reviews on foreign investments as part of its efforts to attract foreign investment while minimizing potential threats to national security.
Foreign investment security reviews are performed on foreign investments in major industries and critical technology that impact national security, foreign investment in essential military equipment and military technologies, and foreign investment in public services and major infrastructure that may impact national security.
The foreign investment security review process covers foreign owned business entities formed in China or those formed through the acquisition of domestic entities by foreign investors. It also includes share assignments and other investment and business activities involving foreign investors, with the National Development and Reform Commission and Ministry of Commerce being responsible for conducting such reviews. In addition to the National Development and Reform Commission and Ministry of Commerce, other agencies involved in the security review process may participate in the review of investments in scientific research, national defense, and other important areas as necessary to ensure they can effectively perform their duties.
Security reviews may be conducted using various methods based on the specific requirements of each case, and may include document reviews, on-site inspections, and hearings. Agencies conducting security reviews may require investors to take any action necessary to eliminate or mitigate any potential impact or harm to national security arising from their investments.
Reviewing agencies are required to maintain the confidentiality of foreign investors’ entities and their investors while conducting security reviews, and shall not disclose any information to third parties. The security review process declares a policy goal of to fully protecting the procedural rights of all parties involved and enhance process transparency to ensure a fair, open, and transparent review process.
Relevant Laws
Foreign Investment Act of China (& Administrative Regulations)
Section 40 of the Administrative Regulations to Implement the Foreign Investment Act of People’s Republic of China mandates the administrative bureaucracy to develop and implement a security review process.
See Also: Investment Access Exceptions List
Further Reading
See our comprehensive resources on China’s Foreign Investment Law. and an overview of FDI regulation in our Foreign Investment Law FAQ.