Lex Mundi Global Foreign Investment Restrictions Guide |
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China |
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(Asia Pacific)
Firm
JunHe LLP
Contributors
Audrey Chen |
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| Please provide a short summary of the Foreign Investment Restrictions adopted by your jurisdiction. | PRC’s Foreign Investment Restrictions are set out in the China Foreign Investment Law (“FIL”), Special Administrative Measures for Foreign Investment (“Negative List”), Measures for Security Review of Foreign Investment (“MSR”) and associated regulations. In accordance with FIL, MSR and Negative List,
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| Is your regime focused on economic protectionism, national security, or a combination? | Combination. |
| Who is considered a "foreign investor" and are only investments from particular countries covered? | A foreign citizen or a company/entity incorporated in countries outside of Mainland China is deemed as a “foreign investor”, including investors from Hong Kong, Macao and Taiwan. |
| What sectors are subject to Foreign Investment Restrictions screening? | The foreign investment in the following sectors shall be subject to National Security Review:
Foreign investors are prohibited/restricted from investing in the industries set forth in the Negative List, mainly the ones relating to the non-manufacturing sectors. |
| What are the relevant thresholds? | Not applicable. |
| Is notification under Foreign Investment Restriction rules mandatory? | Yes, notification under Foreign Investment Restriction rules is mandatory. |
| Is the relevant authority's approval required prior to closing? | It depends on factors such as the structures involved and whether any changes for the items registered with the authorities |
| What was the impact of COVID-19 on your foreign investment regime? | Stringent travel restrictions due to COVID-19 slowed down investments into China, over the last 6 months, there have been more activities in many sectors. |
| How active has your agency been in reviewing, delaying, modifying or blocking foreign investments? | The authorities have been very actively encouraging/promoting foreign investment in accordance with the related laws and regulations accordingly by downsizing the Negative List for foreign investment and considering completely lifting restrictions on foreign investment in the manufacturing sector. |
| On what grounds can enforcers review and block a foreign investment? How active have they been in the past 6 months? | Affecting national interest can be the grounds to review a foreign investment, in consideration of Chinese law and practice. No available statistics. |
| Do you expect any regulatory developments over the next 6 months? | Yes. |
Lex Mundi Global Foreign Investment Restrictions Guide
PRC’s Foreign Investment Restrictions are set out in the China Foreign Investment Law (“FIL”), Special Administrative Measures for Foreign Investment (“Negative List”), Measures for Security Review of Foreign Investment (“MSR”) and associated regulations.
In accordance with FIL, MSR and Negative List,
- Information Reporting/Registration Regime: To conduct business in China, foreign investors shall incorporate companies within the PRC. The incorporation of such foreign-invested companies is subject to the report to the Ministry of Commerce (“MOC”) or its competent counterpart and the registration of the State Administration for Market Regulation(“SAMR”) or its competent counterpart.
- Negative List Restrictions: Foreign investors are prohibited from investing in the sectors listed on the Negative List, along with restricting the percentage of foreign ownership for certain sectors as stated in the Negative List.
- National Security Review: The investment in certain sectors that might have national security concerns shall be subject to the scrutiny of the foreign investment security authority, which was set up under the National Development and Reform Commission (“NDRC”), but jointly administered by MOC and NDRC.
Combination.
A foreign citizen or a company/entity incorporated in countries outside of Mainland China is deemed as a “foreign investor”, including investors from Hong Kong, Macao and Taiwan.
The foreign investment in the following sectors shall be subject to National Security Review:
- Any military industry, military industrial accessories and other national defense and security-related sectors, and investment surrounding military facilities; and/or important products and services in these industrial sectors:
- agriculture, energy and resources, equipment manufacturing, infrastructure, transport, cultural products and services, information technology and Internet, finance, key technologies, as well as any other sectors that have a bearing on national security and where foreign investors have obtained de facto control over these invested enterprises.
Foreign investors are prohibited/restricted from investing in the industries set forth in the Negative List, mainly the ones relating to the non-manufacturing sectors.
Not applicable.
Yes, notification under Foreign Investment Restriction rules is mandatory.
It depends on factors such as the structures involved and whether any changes for the items registered with the authorities
Stringent travel restrictions due to COVID-19 slowed down investments into China, over the last 6 months, there have been more activities in many sectors.
The authorities have been very actively encouraging/promoting foreign investment in accordance with the related laws and regulations accordingly by downsizing the Negative List for foreign investment and considering completely lifting restrictions on foreign investment in the manufacturing sector.
Affecting national interest can be the grounds to review a foreign investment, in consideration of Chinese law and practice.
No available statistics.
Yes.