Security review for M&A by foreign investors under spotlight

There are no specific laws in China that govern a national security review of mergers and acquisitions of Chinese domestic enterprises by foreign investors. The relevant principles for such reviews are set out in the Anti-Monopoly Law, implemented since 1 August 2008, and the Provisions of the Ministry of Commerce on Merger and Acquisition of Domestic Enterprises by Foreign Investors (foreign M&A rules), enacted by the Ministry of Commerce (MOFCOM) on 22 June 2009.

However, while the above-mentioned regulations provide principal rules requiring relevant parties to report foreign M&A transactions that may have a potential impact on national security, no specific and enforceable mechanism sets out details of the security review, such as the scope, procedures or duration.

Following the above principles, the Notice of the State Council on Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors was released by the State Council on 3 February 2011. On 25 August 2011, MOFCOM released the Provisions of Ministry of Commerce on Implementation of Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors. Since that time, although there is no separate law, through administrative regulations China has established a workable national security review regime for foreign M&A.