China’s Security Review System For Foreign Investment: Where Do We Stand?

Keywords: China, security review system, mergers, acquisitions, domestic enterprises, foreign investors

Almost three years have passed since China formally established its security review system with regard to mergers and acquisitions of domestic enterprises by foreign investors ("Security Review System"). The regime has had a relatively low profile when compared with the acceleration in China's Anti-Monopoly Law ("AML")-related enforcement activity and procedural developments over the same period.

The very broad scope and criteria for review, and the lack of significant new developments since the Ministry of Commerce ("MOFCOM") finalized its procedural rules for the regime,¹ mean that there remains the risk that, in seeking to ensure compliance with these rules, local bureaus could broadly interpret what may be a "sensitive" sector or investment and thereby cause further delays in relation to foreign investment deals (by referring such transactions to MOFCOM