Promulgated by: National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM).
Document No.: Decree No. 37 of NDRC and MOFCOM.
Adopted at the 13th meeting of NDRC on November 27, 2020, with State Council approval. Promulgated December 19, 2020. Effective January 18, 2021. He Lifeng (NDRC) and Zhong Shan (MOFCOM).
Article 1. These Measures are enacted in accordance with the Foreign Investment Law of the People’s Republic of China, the National Security Law of the People’s Republic of China and the relevant laws for the purposes of adapting to the needs of forming a new pattern of all-round opening up, effectively preventing and defusing national security risks while actively promoting foreign investment.
Article 2. For foreign investments that affect or may affect national security, security review shall be conducted in accordance with the provisions of these Measures. For the purpose of these Measures, the term “foreign investment” refers to the investment activities carried out by foreign investors directly or indirectly within the territory of the People’s Republic of China (hereinafter referred to as “within China”), including the following circumstances:
(I) where foreign investors invest, solely or jointly with other investors, in new projects or establishing enterprises in China;
(II) where foreign investors acquire equity or assets of domestic enterprises by way of merger and acquisition; or
(III) where foreign investors make investments in China in any other form.
Article 3. The State establishes a working mechanism for the security review of foreign investments (hereinafter referred to as the “working mechanism”) to be responsible for organizing, coordinating and guiding the security review of foreign investments. The office of the working mechanism is set up under the National Development and Reform Commission. It is led by the National Development and Reform Commission and the Ministry of Commerce to undertake he routine work of the security review of foreign investments. 50% 50%
Article 4. For foreign investments within the following scope, foreign investors or the relevant parties in China (hereinafter referred to collectively as the “parties concerned”) shall take the initiative to declare to the office of the working mechanism prior to implementation of the investments: (I) investments in military industry, military industrial supporting and other fields relating to the security of national defence, and investments in areas surrounding military facilities and military industry facilities; and
(II) investments in important agricultural products, important energy and resources, important equipment manufacturing, important infrastructure, important transport services, important cultural products and services, important information technology and Internet products and services, important financial services, key technologies and other important fields relating to national security, and obtaining the actual controlling stake in the investee enterprise. Obtaining the actual controlling stake in the investee enterprise” referred to in item (II) of the preceding paragraph shall include the following circumstances:
(I) where the foreign investor holds more than 50% of the equity of an enterprise;
(II) where the foreign investor holds less than 50% of the equity of an enterprise, but the voting rights held by it can have significant impact on the resolutions of the board of directors, the board of shareholders or the general meeting of shareholders; and
(III) other circumstances where the foreign investor may have significant impact on the enterprise’s business decision-making, human resources, finance, technology etc. For foreign investments within the scope stipulated in the first paragraph of this Article (hereinafter referred to as the “scope of declaration”), the office of the working mechanism may require the parties concerned to make declaration.
Article 5. Prior to declaration of a foreign investment to the office of the working mechanism, the parties concerned may consult the said office on the relevant issues.
Article 6. The parties concerned shall submit the following materials for declaration of a foreign investment to the office of the working mechanism: (I) a declaration letter;
(II) an investment plan;
(III) a statement on whether the foreign investment will have an impact on national security; and
(IV) other materials stipulated by the office of the working mechanism. The declaration letter shall state the name, address, scope of business of the foreign investor, basic information of investment and other matters stipulated by the office of the working mechanism. The office of the working mechanism may, based on work needs, entrust the relevant departments of the people’s governments of provinces, autonomous regions or centrally administered municipalities with collection and forwarding of the materials stipulated in the first paragraph of this Article on its behalf. 15
Article 7. The office of the working mechanism shall, within 15 working days from the date of receipt of the materials stipulated in Article 6 hereof submitted by the parties concerned or forwarded by the relevant departments of the people’s governments of provinces, autonomous regions or centrally administered municipalities, make a decision on whether the foreign investment declared is subject to security review and notify the parties concerned in writing. Prior to a decision made by the office of the working mechanism, the parties concerned shall not make the investment. The parties concerned shall not make the investment unless the office of the working mechanism decides that security review is not required. 30
Article 8. The security review of foreign investments includes general review and special review. Where the office of the working mechanism decides to conduct the security review of a foreign investment declared, it shall complete the general review within 30 working days from the date of decision. During the review period, the parties concerned may not make the investment. Upon general review, if it is deemed that the foreign investment declared will not have an impact on national security, the office of the working mechanism shall make a decision on passing the security review; if it is deemed that the foreign investment will or may have an impact on national security, the office of the working mechanism shall make a decision on initiating the special review. The decisions made by the office of the working mechanism shall be notified to the parties concerned in writing. 60 Article 9 Where the office of the working mechanism decides to initiate the special review of a declared foreign investment, it shall make a decision in accordance with the following provisions after the review and notify the parties concerned in writing: (I) where the declared foreign investment does not have an impact on national security, a decision on passing the security review shall be made; or
(II) where the declared foreign investment affects national security, a decision on prohibiting the investment shall be made; Where the impact on national security can be eliminated through the imposition of conditions and the parties concerned make a written commitment to accept such conditions, a decision on conditionally passing the security review may be made and the additional conditions shall be specified in the decision. The special review shall be completed within 60 working days from the date of initiation; under special circumstances, the review period may be extended. The parties concerned shall be notified in writing of the extension of the review period. During the review period, the parties concerned may not make the investment.
Article 10. During the security review of the declared foreign investment, the office of the working mechanism may require the parties concerned to supplement the relevant materials and inquire of the parties concerned about the relevant information. The parties concerned shall cooperate therewith. The time for the parties concerned to provide supplementary materials will not be included in the examination period.
Article 11. During the security review of the declared foreign investment conducted by the office of the working mechanism, the parties concerned may revise the investment plan or revoke the investment. If the parties concerned revise the investment plan, the review period will be re-counted from the date of receipt of the revised investment plan by the office of the working mechanism; if the parties concerned cancel the investment, the review will be terminated by the office of the working mechanism .
Article 12. Where the office of the working mechanism decides that the foreign investment declared passes the security review, the parties concerned may make the investment; in case of the decision on prohibiting the investment, the parties concerned may not make the investment; if the investment has been made, the equity or assets shall be disposed of within a time limit and other necessary measures shall be taken to restore the equity or assets to the status before the implementation of the investment and eliminate the impact on national security; and If a decision on conditionally passing the security review is made, the parties concerned shall make the investment under the additional conditions.
Article 13. The implementation of a decision on the security review of a foreign investment shall be supervised by the office of the working mechanism in conjunction with the relevant departments and local people’s governments; for a foreign investment that passes the security review with conditions, the office of the working mechanism may verify the implementation of such conditions by such means as requiring the relevant supporting materials and conducting on-site inspection.
Article 14. After the office of the working mechanism makes a decision that the declared foreign investment is not subject to security review or or passes the security review, if the parties concerned change the investment plan, which affects or may affect the national security, the parties concerned shall make declaration anew to the office of the working mechanism in accordance with the provisions hereof.
Article 15. Where the relevant organs, enterprises, social groups or the general public deem that a foreign investment affects or may affect the national security, they may propose suggestions on security review to the office of the working mechanism.
Article 16. For any foreign investment that falls within the scope of declaration, if the parties concerned make investment without making declaration in accordance with the provisions hereof, the office of the working mechanism shall order them to make declaration within a time limit; in case that the party concerned refuse to make declaration, the office of the working mechanism shall order them to dispose of equity or assets and to take other necessary measures within a time limit to restore the equity or assets to the status before the implementation of the investment and eliminate impact on national security.
Article 17. Where the parties concerned provide false materials to or conceal relevant information to the office of the working mechanism, the said office shall order them to make correction; or where the parties concerned pass the security review by cheating such as providing false materials and concealing relevant information, relevant decisions shall be revoked; if the investment has been made, the parties concerned shall be ordered to dispose of equity or assets and to take other necessary measures within a time limit to restore the equity or assets to the status before the implementation of the investment and eliminate impact on national security.
Article 18. For any foreign investment that passes the security review with conditions, if the parties concerned fail to make investment under the additional conditions, the office of the working mechanism shall order them to make correction; in case that the party concerned refuse to make correction, the office of the working mechanism shall order them to dispose of equity or assets and take other necessary measures within a time limit to restore the equity or assets to the status before the implementation of the investment and eliminate impact on national security.
Article 19. The parties concerned falling under any of the circumstances as prescribed in Article 16, Article 17 or Article 18 hereof shall be included in the relevant credit information system of the State as parties with poor credit records, and be subject to joint punishment in accordance with the relevant provisions of the State.
Article 20. Where any functionary of a state organ abuses his/her power, neglects his/her duties, commits illegalities for personal gains, or divulges any state secret or the trade secret he/she has access to during the security review of a foreign investment, he/she shall be punished in accordance with the law; where a crime is constituted, he/she shall be investigated for criminal liability in accordance with the law.
Article 21. These Measures shall apply mutatis mutanda to the investments made by investors from Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan region that affect or may affect the national security.
Article 22. Where foreign investors’ purchase of the shares of any domestic enterprise through Stock Exchanges or other stock exchanges approved by the State Council affects or may affect the national security, the specific measures for the application hereof shall be developed by the securities regulatory authority under the State Council in conjunction with the office of the working mechanism.
Article 23. These Measures shall come into force 30 days after the date of promulgation. PAGE/NUMPAGES PAGE/NUMPAGES