China’s New National Security Review Process for Foreign Acquisitions: Crossing the River by Feeling the Stones


China’s State Council recently released long-anticipated guidelines, entitled the Notice on the Establishment of the Security Review System for Foreign Mergers and Acquisitions of Domestic Enterprises (the Notice), for the establishment of a panel review process for acquisitions by foreign investors of domestic enterprises that have national security implications. The Notice is dated February 3, 2011, and will become effective on March 5, 2011 – 30 days after its promulgation.

The State Council has put in place a review system that follows to a significant degree the national security review procedure undertaken by the Committee on Foreign Investment in the United States (CFIUS). The announcement by the State Council of the security review system coincides with CFIUS’s recent high-profile ruling against an acquisition in the United States by Chinese telecommunications equipment manufacturer Huawei, although it is unlikely the events are connected.

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