China seeks to tighten security reviews of foreign investment
Updated 19:23, 20-Dec-2020

China's National Development and Reform Commission and the Ministry of Commerce on Saturday proposed new regulations to tighten reviews of foreign investment affecting national security. 

The top economic planner and the commerce ministry are set to take the lead in undertaking security reviews of foreign investment. The proposed regulations will be in effect 30 days after release, or on January 18, 2021. 

The proposed regulations cater to the needs for a new round of full-scale opening up and actively facilitate rapid growth in foreign investment, thus preventing and deflating national security risks. 

The second-largest economy in the world put in place a foreign investment security review system back in 2011. In the past 10 years, the foreign investment management system has undergone substantial reforms. 


The Foreign Investment Law came into effect on the first day of 2020 and formally established a "pre-entry national treatment plus negative list" management system and a reporting system for foreign investment, improving the facilitation of foreign investment to a large extent. 

In a bid to spur on foreign investment and maintain national security, the Foreign Investment Law stipulates that the country shall embrace a security review system of foreign investment that affects or may affect national security, an internationally accepted practice. For instance, the U.S. enacted the Foreign Investment Risk Review Modernization Act in 2018 and Australia rolled out the Foreign Investment Reform (Protecting Australia's National Security) Act in 2020.

Building on the Foreign Investment Law and National Security Law, the proposed regulations summarize the review practices in the past 10 years and formulate all-around, systematic procedures of the foreign investment security review system. 

Consisting of 23 articles in spheres like review organs, procedures, scopes, and handling of violations, the proposed regulations further optimize the standardization, accuracy, and transparency of review work. 

In the meantime, it minimizes the impact on foreign investment activities and protects the enthusiasm, lawful rights, and interests of foreign investment.  

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