China’s national security screening rules for foreign investments enter force

Name: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years
Uploaded: 2021-01-19T12:45:14.000Z
Duration: 1 min 33 s
Description: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

Seen as retaliation for growing opposition to Chinese investments abroad, the laws require screening across a broad range of sectors

Foreign businesses in China worry about further market distortions, but Beijing says rules mimic screening mechanisms in other countries

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The screening mechanism covers everything from defence to agriculture and supersedes China’s previous national security review rules introduced in 2011 and 2015. Photo: AFP

Orange Wang

Published: 8:45pm, 19 Jan 2021Updated: 9:18am, 20 Jan 2021

China’s new rules for vetting foreign investments on national security grounds came into effect on Monday, with lobby groups warning that it could put a dent in Beijing’s plans to attract more international investors.

The new regulations, formally announced last month, are seen as retaliation for the Trump administration’s ongoing blacklisting of hundreds of Chinese firms on national security grounds.

Beijing, however, says the regulations are needed to “lay solid foundations for a new round of opening up that is broader, wider and deeper”.

They entered force just weeks after the publication of a new foreign investment catalogue that opened 127 new items to international firms, mainly in investment-starved regions in China’s central, western and northeastern regions, effective January 27.

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China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

Foreign business lobbyists in China warned that the new rules, which will be applied to a broader range of sectors than previous investment screening mechanisms, are not compatible with this bid to lure more international investors.

European businesses are concerned by the broad scope of the new rules, said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

“Overall, the measures narrow the scope of foreign investment and are inconsistent with China’s stated goals of further opening-up as well as increasing predictability and transparency in the business environment,” Wuttke said, adding that the chamber was concerned about the lack of an appeals process in the protocol, which states that all national security review decisions are final.

The screening mechanism covers everything from defence to agriculture and supersedes China’s previous national security review rules introduced in 2011 and 2015.