Measures for Security Examination of Foreign Investment issued! An official explanation of the fifth question

Approved by The State Council, the National Development and Reform Commission and the Ministry of Commerce on December 19, 2020, issued the "Measures for security examination of Foreign Investment" (hereinafter referred to as "Measures for Security Examination"), according to the NDRC's website.

It is a common international practice to conduct security examination on foreign investment that affects or may affect national security. In 2011, China established a security review system for foreign investment. In nearly a decade, foreign investment management system after overhaul, especially this year the implementation of the law of the People's Republic of China on foreign investment (hereinafter referred to as "foreign investment") before the law established access national treatment plus negative inventory management system, establish foreign-funded information reporting system, boost foreign investment facilitation. At the same time, in order to actively promote foreign investment and effectively safeguard national security as a whole, the Law on Foreign Investment stipulates that the state shall establish a safety examination system for foreign investment to carry out safety examination for foreign investment that may or may affect national security.

"Ann trial method" to "foreign investment in the state security law as the main legal basis, overall national security concept and practice of new development concept, adhere to the overall development and safety, adhere to the opening and paying equal attention to safety, summarized the past 10 years to review the work practice, draw lessons from the main achievements of state censorship, foreign investment security review system to make a comprehensive system of rules, to actively promote and protect foreign investment at the same time, effectively prevent and dissolve the risk, the national security escort for higher level opening to the outside world, help build domestic large cycle as the main body, domestic and international new development pattern of two-cycle promote each other.

"Ann trial method", a total of 23, the provisions of the applicable review of foreign investment type, censorship, examination scope, examination procedures, review decided to supervise the implementation and processing, etc., to further improve the standardization, precision, and the transparency of review work, reduce the impact of foreign investment, protecting the legal rights and interests of foreign investment enthusiasm and. According to the Measures on Security review, the state has established a working mechanism for the security review of foreign investment. The office of the working mechanism is set up in the National Development and Reform Commission, which is led by the National Development and Reform Commission and the Ministry of Commerce to undertake the daily work of the security review of foreign investment. The Measures for Security and Examination shall go into effect 30 days after its promulgation.

The person in charge of the Office of the Foreign Investment Security Examination Mechanism answered the question on the Measures for The Security Examination of Foreign Investment

Approved by The State Council, the National Development and Reform Commission and the Ministry of Commerce promulgated the Measures for The Security Examination of Foreign Investment (hereinafter referred to as the Measures for The Security Examination) on December 19, 2020, which shall come into force 30 days after the date of promulgation. In order to get more information about the promulgation of the Measures on Security and Examination, the reporter interviewed the relevant person in charge of the Office of The Working Mechanism for Foreign Investment security examination.

Q: Please brief us on the background of the security Review Measures.

A: Opening to the outside world is China's basic state policy. Since the eighteenth congress, adhere to the win-win strategy of opening up in China, continue to push to expand opening to the outside world, strive to create market under the rule of law internationalized business environment, greatly reduce the foreign investment access, 2017-2020 reduce foreign investment access negative list for four consecutive years, free trade area and the editions of negative listing restrictions shrink to article 33 and article 30 respectively, manufacturing, energy resources, infrastructure, agriculture, finance and other areas open to foreign capital to achieve significant, China became the world's most popular destinations for foreign investment. Since the beginning of this year, the COVID-19 epidemic has had a huge impact on global cross-border investment. Despite this grim situation, China's utilization of foreign investment has increased steadily, making it one of the few major economies in the world that has maintained its growth by absorbing foreign investment.

While promoting high-level opening up to the outside world, the state is also steadily advancing the reform of the foreign investment management system. The Law on Foreign Investment issued in 2019 and its implementation regulations have established the basic framework of China's legal system for foreign investment in the new era. The management system of pre-establishment national treatment plus a negative list has been formally established at the level of laws and regulations, providing a strong legal guarantee for China's opening-up to a higher level. The Law on Foreign Investment and the regulations on its implementation also provide for the safety examination system for foreign investment, make it clear that the state establishes the safety examination system for foreign investment, and conduct safety examination for foreign investment that may or may affect state security. Foreign-invested enterprises, foreign business associations and other relevant authorities pay close attention to the implementation of the foreign investment safety examination system, and look forward to the promulgating of specific provisions on foreign investment safety examination so as to facilitate investment decision-making in accordance with laws and regulations.

Security examination for foreign investment is an internationally accepted foreign capital management system, which plays an important role in balancing economic interests and safeguarding national security. Launch in recent years, the world's major countries and regions and improve the system of foreign investment security review, the United States introduced the foreign investment risk review modernization act, the European Union regulations on the foreign direct investment (fdi) framework, of foreign-funded reform act was introduced in Australia, Germany, and Japan respectively revised the act of foreign trade and paying foreign exchange and foreign trade law, Britain is formulating the national safety and investment.

Against this background, the National Development and Reform Commission and the Ministry of Commerce, based on the summary of China's foreign investment security review practice since 2011, reported to The State Council for approval, formulated and issued the Security Review Measures.

Q: What is the general idea behind the Security Measures?

A: General Secretary Xi Jinping stressed that the more open we are, the more we need to pay attention to security. We need to balance development and security. We need to strengthen our competitiveness, our ability to open up regulation, and our ability to prevent and control risks. The fourth Plenary Session of the 19th CPC Central Committee made plans to build a new system for an open economy of a higher level and improve the security review system for foreign investment. The fifth Plenary Session of the 19th CPC Central Committee called for overall planning for development and security, integrating security development in all areas and the whole process of China's development, and improving the system of state security review and supervision.

In the process of making "Ann trial method", we adhere to xi jinping, a new era the ideas of socialism with Chinese characteristics as a guide, learn to grasp the party's in the 19th and the 19th session of 2, 3, 4, fifth plenary session of the spirit, practice of overall national security concept and new development concept, a sound system of foreign investment security review, the escort for higher level opening to the outside, help build domestic large cycle as the main body, domestic and international new development pattern of two-cycle promote each other.

First, we need to coordinate development and security. Adhere to the open and security, and actively promote foreign investment and maintain the relationship between national security, establish national treatment prior to the entry and negative inventory management system that can meet the needs of foreign investment security review system, to promote open still wider to the outside world with the risk prevention and control, effective control affects or may affect the national security of foreign investment, determined to build a national security barrier, guard against resolving national security risk, and enhance pertinence, avoid security review generalization.

Second, review practices to fill the gaps in supervision. Since 2011, China has established a security review system for the mergers and acquisitions of domestic enterprises by foreign investors, and since 2015, pilot free trade zones have implemented security review measures for foreign investment that are compatible with the negative list management model. The Measures on Security review summarizes the work practices of the past ten years, especially the beneficial practices in the security review of foreign investment in pilot free trade zones, adjusts the review bodies and scope appropriately, and includes sensitive areas such as finance into the review scope.

Third, we should draw on international experience based on China's national conditions. Based on the new situation and characteristics of China's national security, this paper refers to the new changes of foreign investment security review system in major countries in recent years, absorbs and learns from beneficial institutional achievements, and forms a security review system that is not only suitable for China's national conditions but also in line with international practices.

The fourth is as simple as possible, to avoid excessive increase in the burden of enterprises. Set procedures and time limits for the review in accordance with necessary and reasonable principles. At the same time, the safety review is carried out in three stages. According to the risk of declared projects, the review is carried out in a hierarchical and progressive manner, and the number of projects entering the second and third stages is reduced. The opinions and decisions of the review will be timely fed back to investors.

Q: How to put both openness and security into practice?

A: Over the past 40 years of reform and opening up, foreign-invested enterprises have been deeply integrated into China's economy and made positive contributions to economic and social prosperity and stability. Looking ahead, China will only open wider to the outside world. We will not change our direction of opening up, our determination to continuously improve the business environment, or our attitude to actively promote foreign investment.

"Ann trial method", the implementation of foreign investment security review, not protectionism, more is not open, main purpose is to meet the needs of the open form a comprehensive new pattern, perfect the system of open to the public security and at the same time of actively promote and protect foreign investment, effectively prevent and dissolve the national security risk, to a higher level, opening to the outside world. Opening to the outside world without security guarantees is unsustainable. Only by making security risks more closely guarded against can we lay a solid foundation for a new round of opening-up and better implement opening-up on a larger scale, in a wider range of areas and at a deeper level. During the implementation of the Measures on Security review, we will pursue development and ensure security through opening-up, conduct precise reviews of foreign investment that may or may affect national security, and avoid generalized security reviews.

Next, we will jointly with the relevant parties well implement the foreign investment law and its implementing regulations on the promotion and protection of the provisions of the foreign investment in the implementation of good "Ann trial method" at the same time, actively promote the rules, regulations, management, and standard system of open type, sound before access, national treatment and negative list management system, in the supply of land, tax breaks and qualification licensing, standards and foreign-invested enterprises equally, orderly continue to expand the opening to the outside world, introducing the new encourage the catalogue of industries for foreign investment, continue to encourage foreign investment in advanced manufacturing and modern services, energy conservation, environmental protection and other fields, We will create a high-standard, market-oriented, and law-based international business environment.

Q: What are the main contents of the Security Measures?

A: There are 23 articles in the Security Review Measures, which mainly provide for the following:

First, foreign investment security review agencies. The state establishes a working mechanism for the safety review of foreign investment. The office of the working mechanism is set up in the National Development and Reform Commission, which is led by the National Development and Reform Commission and the Ministry of Commerce to undertake the daily work of the safety review of foreign investment. According to National Development and Reform Commission Announcement No. 4 of 2019, the application for foreign investment security examination is accepted by the National Development and Reform Commission's administrative Service Hall.

Second, the scope of security examination for foreign investment. To carry out security examination for foreign investment in the following areas: to invest in military industry, military supporting facilities and other fields related to national defense security, and to invest in military facilities and military facilities surrounding areas; Investment relationship between the national security of agricultural products, important energy and resources, major equipment manufacturing, infrastructure, important transportation services, important cultural products and services, information technology and Internet products and services, financial services, key technology, and other important areas, and obtain the invested enterprise's actual control. If foreign investors are not sure whether their investments fall within the scope of security review, they can consult the Office of Foreign Investment Security Review Mechanism for specific projects. Please refer to National Development and Reform Commission Announcement No. 4 of 2019 for contact information.

Third, the mechanism for foreign investment security examination and declaration. The foreign investor or the relevant party in China shall take the initiative to declare the investment within the scope of examination before the investment is implemented. The office of foreign Investment Safety Examination mechanism has the right to request the time limit for the foreign investment which should be reported but not reported. The relevant state organs, enterprises, social organizations and the public may also submit suggestions for examination to the office of working Mechanism.

Fourth, procedures and time limits for security examination of foreign investment. The security review is divided into three phases. The first phase is a preliminary review, which is decided whether to initiate the security review within 15 working days from the date of receipt of materials meeting the declaration requirements. The second stage is a general review, with a decision to approve the review taken within 30 working days from the date of initiation of the review, or to proceed to the next stage of the review in accordance with the procedure. The third phase is a special review of 60 working days, which is not a mandatory procedure for every project and only those projects that have not passed the general review will enter the special review; Special review time limits may be extended in exceptional circumstances; A review decision will be issued upon completion of the special review. During the review period, the time for supplementary materials shall not be included in the review period.

Fifth, foreign investment security review decisions are implemented. For those that pass the security examination, investment may be implemented; If the conditions attached pass the examination, the investment shall be implemented in accordance with the additional conditions; Investment that is prohibited may not be implemented.

Sixth, punishment for violations. In case of any violation such as refusal to declare, falsification or non-execution of additional conditions, the party concerned may be ordered to dispose the equity or assets within a time limit, or the bad credit records may be incorporated into the relevant state credit information system and a joint punishment may be imposed in accordance with the relevant state regulations.

Q: When will the security review regulations on foreign investment in the securities sector be released?

Answer: "Ann trial method" article 22 regulations, foreign investors through the stock exchange or other approved by the State Council securities exchange buying shares of domestic enterprises, affects or may affect national security, these measures shall apply to the specific measures shall be worked out by the securities regulatory agency under the State Council together with the foreign investment office safety review work mechanism. Relevant work is progressing.