On 19 December 2020, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued the "Measures on Security Review of Foreign Investment", which builds on the Foreign Investment Law of the People's Republic of China and requires foreign investors to pass relevant reviews before investing in specific areas from a national security perspective. The review will come into effect on 18 January 2021 and will have a significant and material impact on foreign investment projects investing in specific sectors.

Q:	What are the main types of foreign investment regulated by the Review?
A:	The Foreign Investment Security Review applies to the investment activities of foreign investors directly or indirectly in the territory of the People's Republic of China, including. 1. Foreign investors investing in new projects or establishing enterprises in the territory, either alone or jointly with other investors 2. Foreign investors acquiring equity or assets of domestic enterprises through mergers and acquisitions; and 3. Foreign investors investing in the territory through other means.
Q:	What are the industry sectors regulated by the review?
A:	Investment in areas related to national defence and security, such as military industry and military industry supporting facilities, as well as investment in the areas surrounding military facilities and military industry facilities; Investment in important agricultural products, important energy and resources, major equipment manufacturing, important infrastructure facilities, important transport services, important cultural products and services, important information technology and Internet products and services, important financial services, key technologies and other important areas related to national security, and obtaining effective control of the invested enterprises.
Q:	What is the review body for this review approach?
A:	According to the Security Review Measures, the State has established a working mechanism for security review of foreign investment; the office of the working mechanism is located at the NDRC, and the NDRC as well as the Ministry of Commerce will take the lead in undertaking the relevant security review work.
Q:	What is the trigger mechanism for this security clearance approach?
A:	Foreign investors or relevant parties in the territory should take the initiative to declare investments that fall within the scope of the review before the implementation of the investment. For foreign investments that should be reported but have not been reported, the Office of the Working Mechanism has the right to request the parties concerned to do so by a deadline. Relevant authorities, enterprises, social organisations and the public may also submit proposals for review to the Office of the Working Mechanism.
Q:	What are the recommendations regarding the potential commercial impact of this security clearance approach?
A:	Prior to the implementation of a foreign investment act or transaction, it is important to fully assess whether the relevant investment act or transaction falls within the scope of the security review, and to make appropriate preparations in advance, such as drafting and preparing relevant information and documents, and making good time planning, as necessary. As the Security Clearance Measures contain underwritten statements on the types of foreign investment and the scope of investment areas to which they apply, foreign investors may consider deciding whether they need to consult with the Working Mechanism Office in advance, depending on the project or investment. If consultation is required, consider the extent to which information about the transaction will be disclosed.