Rules issued on security review of foreign investment

Employees work at the production line of FAW-Volkswagen in Changchun, Jilin province. [Photo/Xinhua]

The newly released rules on China's security review of foreign investment will effectively restrain national security risks while actively promoting and protecting foreign investment, analysts said on Sunday.

They made the remark after the National Development and Reform Commission and the Ministry of Commerce jointly specified provisions concerning the security review mechanism on foreign investment on Saturday.

Under the new measure, the scope of foreign investment that will be subject to security review includes the military industry and other national defense and security fields, locations near military facilities and military industrial facilities, as well as major agricultural products, energy and certain fields that have importance in national security.

Approved by the State Council, China's Cabinet, the 23-clause rules aim to support the country's higher-level opening-up and facilitate the new growth paradigm, said a statement released by the NDRC and the ministry. The rules will take effect 30 days after their release.

Ma Yu, a senior researcher at the Beijing-based Chinese Academy of International Trade and Economic Cooperation, said it is fairly common for countries to carry out security reviews on foreign investment that affects or may affect national security.

From the perspective of global competition, the legal environment is a vital element in supporting both economic growth and the earning strength of multinational corporations, said Huang Jin, a researcher at the Chinese Academy of Social Sciences' Institute of International Law.

A well-developed legal system will not only boost sales for global companies, but also create an even bigger market, he said at an economic forum on Saturday.

As China's continuously improving business environment has provided global companies a fair and open market, an efficient supply chain and a competitive talent pool, foreign direct investment in China increased by 6.3 percent year-on-year to 899.38 billion yuan ($137.6 billion) between January and November of this year, according to the Ministry of Commerce.

While China continues to attract foreign investment in high-end manufacturing, modern services and environmental protection sectors, and creates a law-based business environment, the US Commerce Department announced on Friday that it had added 59 Chinese companies to a trade blacklist, in the name of "protecting US national security".

Because of this move, US firms will have to obtain a license to do business with companies on the list.

The Ministry of Commerce responded to the US move by calling it "another example of the US abusing its power to suppress Chinese companies".

China will continue to take necessary measures to safeguard the legitimate rights and interests of its companies, according to the ministry.

The new restrictions imposed on the Chinese companies have already caused controversy in the US, because China and the US have a wide range of cooperation on science, technology and trade, and enlarging the blacklist also severely damages the interests of US companies and universities, said Tu Xinquan, a professor and dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.

Zhang Yongjun, a researcher at the Beijing-based China Center for International Economic Exchanges, said that even though more Chinese companies have been added to the blacklist, their commercial operations will not be affected as they have already built a global presence and the US market only accounts for part of their overseas operations.