What is China's New Measures for Security Review of Foreign Investment?

Published on 2021-02-03

The National Development and Reform Commission (“NDRC”) and the Ministry of Commerce (“MOFCOM”) jointly published the "Measures for the Security Review of Foreign Investments" (the "NSR Measures"), which has been implemented on 18 January 2021.

In this issue, we will give you a brief introduction to the NSR Measures from ascpets of 
  • Review Scope
  • Application Mechanism
  • Procedures and Timeframe
  • Review Decisions and Sanctions
  • Enforcement Authority

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The NSR Measures is an important provision for foreign investment security review in China, helping to achieve a wider opening of foreign investment, but in terms of the division of areas requiring security review, the word "important" is mainly used in the regulations, without quantifying the relevant criteria.

Tricor understands the enforcement authority will be more flexible during the implementations and enforcements. However, foreign investors should fully understand whether the field they are investing in involves security issues before investing, and carry out applications for security clearance in accordance with the law, so as to prevent their investments from being terminated due to security clearance issues during the investment process.

With the opening up of the financial sector in recent years, a large number of foreign funds have entered China for investment activities. Unlike general investment activities, the investment of funds may involve multiple fields and levels of investment, therefore, foreign funds should consider the impact ofsecurity review on the arrangement for a specific project before investing, so as to make appropriateinvestment decisions.