China introduces security review rules for foreign investors

Foreign investors in Chinese industries from defence to tech will from next year face an extra layer of scrutiny to ensure their activities do not undermine national security, the country’s top economic planner said Saturday.

Under the new rules, overseas investment in Chinese industries related to the military will automatically be reviewed.

But forays into agriculture, energy, transport, internet and financial services will only face a review if they involve the acquisition of 50% of a Chinese company, or will significantly affect the business.

Investors in those cases must submit to a government review determining whether their moves “affect national security”, according to the National Development and Reform Commission (NDRC), which did not specify what activities would be seen as having such an effect.

The announcement comes nearly a year after China’s new foreign investment law came into force, promising to give local and foreign companies equal treatment in the Chinese market.

The NDRC said the rules, which will take effect on Jan 18, were intended to “effectively prevent and dissolve national security risks while actively promoting foreign investment”.

China said Friday it was in the last stretch of talks on a landmark investment agreement with the European Union that would allow the bloc’s member states greater access to the lucrative Chinese market.