National Security Review for Foreign Investment in China: A Transnational Evolution

Abstract

AbstractThe national security review mechanisms for foreign investments in China are influenced strongly by cross-border factors. Since China’s reform and opening-up, China national security review mechanisms for foreign investment have gone through four phases. The beginning phase is from 1979 to 1994, focusing on administrative licensing procedures of establishing enterprises; the second phase is from 1995 to 2002, strengthening the approvals of foreign companies’ access to certain industries or sectors; the third phase is from 2003 to 2014, emphasizing to establish a national security review mechanism for foreign mergers and acquisitions; and the fourth phase is from 2014 to the present, striving to build a uniform national security review mechanism for foreign investments. In the face of peculiar economic and political situations in different phases, China had adopted distinct security review measures for foreign investments. Amid these transformations, China has gradually unified the approach to the governance of foreign investments by enacting Foreign Investment Law, which is effective on January 1, 2020. At the same time, China has created a uniform national security regime by enacting National Security Law and related security regulations. Following the gradually clear framework of national security and the unified approach to foreign investments, the next step would be establishing a uniform and consistent mechanism of national security review for foreign investments. While transnational communities and regimes help to shape domestic regulations in China, many domestic institutions, including state-owned enterprises, play key roles in these transformations. By examining the transitions of Chinese national security review mechanisms for foreign investment, this chapter demonstrates how critical events in these four periods led to these transitions. This chapter argues that the development of the national security review mechanisms for foreign investments in China is a transnational approach: The interactions between international communities and China government have greatly contributed to the transformations of Chinese security review mechanisms for foreign investments; in return, China will contribute its unique approach to the national security review mechanisms for foreign investments. This chapter emphasizes that, in finding its own approach to the mechanisms of national security review for foreign investments, China can both learn from and teach other countries.