China forms national security review for buyouts by foreign firms

14:48, March 08, 2011      

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Buyouts of Chinese businesses by foreign investors will be subject to national security reviews by the Chinese government. Chinese Commerce Minister Chen Deming said that by no means indicates any change for China's commitments on further opening up to the rest of the world.

A decree which has been issued by Ministry of Commerce of China and takes effect on March 5 defines in what situations such reviews should be conducted before the deal can be approved.

Chinese enterprises are supposed to provide details of the deals and the foreign investors involved when they file for a security review to the Ministry of Commerce.

It could take 20 days for regulators to make decisions on whether and how the deals can proceed with, including 15 days for a review on whether the check is necessary and five days for the security assessment by a joint committee.

Deals that are thought to have caused or potentially cause impact on China's national security will be annulled or altered to erase the factors that carry those risks.

On March 7, the same day when the rules were issued, China's Commerce Minister Chen Deming stressed at his press conference during the annual session of the National People's Congress that the review, as an international common practice, is designed to facilitate the country's further opening-up process, which needs to take the national security into consideration.

The publication of the rules, he said, would help create a more transparent and workable legal framework.

He hopes that the review could play an effective role in protecting the national security when the Chinese enterprises embrace more foreign investment in their reform and restructuring.

The rules are provisional and subject to public comment. Amendments are possible and a more formal text will be released when the existing one expires on Aug. 31 this year.

By Li Jia, People’s Daily Online

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