China introduces security review rules for foreign investors
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Jeddah – Yasmine El Tohamy – BEIJING: Foreign investors in Chinese industries from defense to tech from next year will face an extra layer of scrutiny to ensure their activities do not undermine national security, the country’s top economic planner said Saturday.
Under the new rules, overseas investment in Chinese industries related to the military will automatically be reviewed.
But forays into agriculture, energy, transport, internet and financial services will only face a review if they involve the acquisition of 50 percent of a Chinese company, or will significantly affect the business.
Investors in those cases must submit to a government review determining whether their moves “affect national security,” according to the National Development and Reform Commission (NDRC), which did not specify what activities would be seen as having such an effect.
The announcement comes nearly a year after China’s new foreign investment law came into force, promising to give local and foreign companies equal treatment in the Chinese market.
The NDRC said the rules, which will take effect on Jan. 18, were intended to “effectively prevent and dissolve national security risks while actively promoting foreign investment.”
China said Friday it was in the last stretch of talks on a landmark investment agreement with the EU that would allow the bloc’s member states greater access to the lucrative Chinese market.
Meanwhile, Beijing accused the US of “bullying” after Washington announced export controls on dozens of Chinese firms over alleged ties to China’s military.
The announcement — in the final weeks of President Donald Trump’s term — comes after relations between Washington and Beijing soured under his administration, which saw the US start a trade war with China and expand its list of sanctioned entities to a few hundred Chinese companies and subsidiaries.
China’s Commerce Ministry on Saturday said it “firmly opposes” the move, which will affect the country’s biggest chipmaker, SMIC, and vowed to “take necessary measures” to safeguard Chinese companies’ rights. The ministry accused the US of “abusing export controls and other measures to continuously suppress” foreign entities.
US Commerce Secretary Wilbur Ross on Friday said the designations, which restrict US companies’ abilities to do business with the firms, are over an array of charges including theft of US technology.
SMIC has received billions of dollars in support from Beijing and is at the heart of its efforts to improve the country’s technological self-sufficiency.
The designation means US companies must apply for a license before exporting to SMIC, and specifically targets the Chinese firm’s ability to acquire materials for producing chips of 10 nanometers or smaller, the best class in the industry.
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