In recent years, with the development of economic globalization and China’s further opening up, the number of foreign investments by mergers and acquisitions (M&As) has been on the rise, which helps diversify the modes of utilizing foreign investment in China, optimize resources allocation, promote technological progress and improve the management levels of Chinese enterprises. To achieve orderly development of M&As by foreign investors to domestic enterprises and safeguard national security, with approval by the State Council, the issue on establishing the system for national security review for M&As by foreign investors of Chinese enterprises (“M&A security review”) is specified as follows:
(I) Scope for M&A security review: M&As by foreign investors of military industrial enterprises and supporting enterprises, enterprises adjacent to major and sensitive military facilities and other entities relating to national defense and security in China, as well as M&As by foreign investors of Chinese enterprises engaged in major agricultural products, energy and resources, infrastructure, transportation services, key technologies and major equipment manufacture, over which foreign investors are likely to exercise de facto control.
III. Working mechanism for the M&A security review
(I) The system of inter-ministerial joint conference on security review for M&As by foreign investors of domestic enterprises (“Joint Conference” for short) will be established to undertake specific M&A security reviews.
(II) Under the leadership of the State Council, the National Development and Reform Commission and the Ministry of Commerce will take the lead for the work by the Joint Conference and coordinate relevant departments to conduct the M&A security reviews on the industries and sectors involved in M&As by foreign investors.
(III) Main responsibilities of the Joint Conference are to analyze the effect of the M&As by foreign investors in domestic enterprises on national security; study and coordinate major issues involved in the security review of M&As by foreign investors of domestic enterprises; conduct security reviews on transactions of M&As by foreign investors of domestic enterprises which require security review and making relevant decisions.