China issues new rules on foreign investment

Review mechanism announced on national security grounds

China published rules on Saturday for reviewing foreign investment on national security grounds, potentially broad measures that it insisted did not amount to protectionism.

The review system announced by the National Development and Reform Commission (NDRC) covers foreign investments in military sectors and the acquisition of controlling stakes in such sectors as energy, natural resources, agriculture, internet technology and financial services. “Only by tightening the fence against security risks can China lay the solid foundations for a new round of opening up that is broader, wider and deeper,” the commission said. This was in line with international practice and would help balance the economic benefits of further opening with the need to ensure national security, the NDRC said.

The announcement came as US President Donald Trump ratcheted up tensions with China during his final weeks in office. Washington added dozens of Chinese companies to a trade blacklist on Friday. Publishing the investment rules is “not protectionism or backtracking from openingup policies,” the NDRC said, asserting that “opening up without protection is not sustainable.” Major economies like the United States, the European Union, Australia, Germany and Japan have established or improved their review mechanisms on foreign investment in recent years, it added. The new system will establish a body dedicated to security reviews, headed by the NDRC and the Ministry of Commerce.