China tightens foreign investment rules to address national security issues

China published rules for reviewing foreign investment on national security grounds, covering foreign investments in military sectors and the acquisition of controlling stakes in internet technology, financial services, energy, natural resources, and agriculture.

The review system was announced by the National Development and Reform Commission (NDRC) after US President Donald Trump added dozens of Chinese companies to a trade blacklist on Friday.

According to NDRC, tightening the fence against security risks was in line with international practice and helps China balance the economic benefits of opening up.

The NDRC emphasized that opening up without protection is not sustainable. It noted that the US, the EU, Australia, Germany, and Japan have established or solidified review mechanisms on foreign investment in recent years.

The rules take effect in 30 days.

China will establish a body dedicated to security reviews to be headed by the NDRC and the Ministry of Commerce.

Last year’s foreign investment law made emphasized that China would establish a review mechanism for foreign investment.