Should Foreign Investors Be Concerned About The New National Security Review Measures In China?

By: Yong Bai (Clifford Chance)

According to the Measures for Security Review of Foreign Investment which became effective from 18 January 2021 (“Measures“), foreign investments into two categories of sectors will require NSR clearance in China:

The first category does not require investments to confer control upon foreign investors. This category comprises exhaustively investments in sectors which concern security of national defence, such as the military industry and military industrial support, and investments in locations that are geographically within the proximity of military facilities and military industrial facilities. 

In practice, we have not come across transactions which involve foreign investors’ investments into military related sectors in China.

The second category requires investments to confer at least de facto control upon foreign investors. This category includes investments into the following list of sectors which are considered to concern national security:

• Important agricultural products;
• Important energy and resources;
• Important equipment manufacturing;
• Important infrastructure;
• Important transport services;
• Important cultural products and services;
• Important information technology (IT) and Internet products and services;
• Important financial services;
• Key technologies; and
• Other important sectors.

In practice, we have been frequently consulted to confirm whether a transaction may be caught sector-wise by the Measures. In this regard, we have the following observations, based on our experience…

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