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Notice of the General Office of the State Council on Issuing the Trial Measures for National Security Review on Foreign Investment in the Pilot Free Trade Zones
2017-12-07

Notice of the General Office of the State Council on Issuing the Trial Measures for National Security Review on Foreign Investment in the Pilot Free Trade Zones

Guo Ban Fa [2015] No.24

 

The people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government; all ministries and commissions of the State Council; and all institutions directly under the State Council:

 

The Trial Measures for National Security Review on Foreign Investment in the Pilot Free Trade Zones, as approved by the State Council, are hereby issued for your conscientious implementation.

 

                          

General Office of the State Council

                        

April 8, 2015

  This document is for public announcement.

Trial Measures for National Security Review on Foreign Investment in the Pilot Free Trade Zones

To effectively complete the work of opening-up in the China (Shanghai) Pilot Free Trade Zone, China (Guangdong) Pilot Free Trade Zone, China (Tianjin) Pilot Free Trade Zone, China (Fujian) Pilot Free Trade Zone, and other pilot free trade zones (hereinafter collectively referred to as “FTZ”), implement the measures for the pilot program of national Security Review on foreign investment (hereinafter referred to as “Security Review”) adaptable to the negative list management mode, direct the orderly development of foreign investment, and safeguard national security, these Measures are hereby developed.  

Chapter 1 Scope of Review

The general principle is that the Security Review shall be conducted on foreign investment which affects or may affect national security and capabilities to ensure national security, or involves investors, targets of merger and acquisition, industries, technologies, and areas which are deemed sensitive.

(1) The Security Review covers: foreign investors' investment in the FTZ in military industry, supportive military industry, and other fields relating to national defense security, or in areas surrounding major or sensitive military facilities; and foreign investors' investment that is made in the FTZ in the fields relating to national security such as important agricultural products, energies and resources, infrastructural facilities, transportation services, culture, and information technology products and services, key technologies, and major equipment manufacturing, through which foreign investors obtain the actual controlling power of the enterprises they invest in.

(2) Foreign investors' investment in the FTZ shall refer to any of the following circumstances:

(a) Foreign investors solely or jointly invest with other investors in new projects or establishment of enterprises;

(b)  Foreign investors have obtained, through merger and acquisition, equities or assets of the enterprises which have been established; or 

(c) Foreign investors make investment through agreement-based control, holding shares for others, trust, reinvestment, overseas transaction, lease, subscribing convertible bonds, and other means.

(3) Foreign investors obtaining the actual controlling power of the enterprises they invest in shall refer to any of the following circumstances:

(a) The total number of the shares held by foreign investors and their associated investors is more than 50%;

(b) The total number of the shares held by several foreign investors is more than 50%;

(c) The total number of the shares held by foreign investors and their associated investors, or several foreign investors is not more than 50%, but the voting rights that they enjoy are enough to have a significant impact on the resolutions of the board of shareholders or the shareholder meeting, and the board of directors; and 

(d) Other circumstances that enable foreign investors to make a significant impact on the business decisions, personnel, finance and technology of the enterprises that they invest in.

Chapter 2 Contents of Review

(1) The influence of foreign investment on national defense security, including the domestic production capacity, domestic service delivery capacity and related facilities required for the national defense.

(2) The influence of foreign investment on the stable operation of national economy.

(3) The influence of foreign investment on the basic life order of society.

(4) The influence of foreign investment on national cultural security and public morality.

(5) The influence of foreign investment on national cyber security.

(6) The influence of foreign investment on the research and development capacity of key technologies involving national security.

Chapter 3 Security Review Working Mechanism and Procedure

(1) The Security Review on foreign investment in the FTZ shall be carried out by the Inter-ministry Joint Meeting of Security Review on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (hereinafter referred to as “Inter-ministry Joint Meeting”). Under the mechanism of Inter-ministry Joint Meeting, the National Development and Reform Commission and the Ministry of Commerce will work with relevant departments, which is selected according to the field that the foreign investment engages in, to conduct Security Review.

(2) The procedure of the Security Review on foreign investment in the FTZ shall be subject to the article 4 under the Notice of the General Office of the State Council on the Establishment of Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (Guo Ban Fa [2011] No.6).

(3) In respect of the foreign investment that affects or may affect national security and whose impact can be eliminated through additional conditions, the Inter-ministry Joint Meeting may require the foreign investors to issue written commitments stating that their investment plans will be modified as required. After obtaining the written commitments from the foreign investors, the Inter-ministry Joint Meeting shall examine and review the additional conditions and issue relevant opinions.

(4) If the administrative authority of the FTZ finds, in the course of handling the registration, examination and approval or review procedures for foreign investment, that the foreign investment falls within the scope of national Security Review, it shall timely notify the foreign investors that they should apply for national Security Review, and suspend the relevant formalities.

(5) When the Ministry of Commerce notifies the foreign investors in writing of the review opinions of the Inter-ministry Joint Meeting, it shall simultaneously pass the review opinions to the administrative authority of the FTZ. If the review opinions reveal that the foreign investment does not affect the national security itself, or does not affect the national security with additional conditions, the administrative authority of the FTZ shall continue to handle relevant procedures.

(6) The administrative authority of the FTZ shall supervise and inspect the implementation of the foreign investment. If they find that the foreign investors provide fake information, omit essential information, change the investment activities after passing the Security Review, or violate the additional conditions, which causes or may cause a significant impact on national security, the administrative authority of the FTZ shall make a report to the National Development and Reform Commission and the Ministry of Commerce, even through the foreign investment Security Review has been finished or the investment has been implemented.

(7) The National Development and Reform Commission, the Ministry of Commerce and the administrative authority of the FTZ shall form a linkage mechanism in information sharing, real-time monitoring, dynamic management and regular review through information-based means.

Chapter 4 Other Provisions

(1) These Measures are applicable to foreign-invested equity investment enterprises, venture capital enterprises and investment companies that make investment in the FTZ.

(2) The Security Review of foreign investment in finance shall be separately stipulated.

(3) The investment in the FTZ by investors from the Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan shall be implemented with reference to these Measures.

(4) The interpretation of these Measures shall be vested in the National Development and Reform Commission and the Ministry of Commerce.

(5) These Measures shall come into force 30 days after the date of issuance.

 

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