In recent years, governments in a number of countries have tightened up their foreign direct investment control regimes.
China is now doing the same with its national security review ("NSR") regime through the introduction of the Measures for the Security Review of Foreign Investment (the "New NSR Measures"). The New NSR Measures were jointly released by China's National Development and Reform Commission ("NDRC") and Ministry of Commerce ("MOFCOM") on 19 December 2020 and became effective on 18 January 2021.
The New NSR Measures build upon the prior NSR rules by expanding their application as follows:
(1) applying more broadly to investments in China made by foreign investors;
(2) giving Chinese regulators the ability to scrutinize investments made through offshore structures or contractual arrangements, which are viewed as indirect investments in China;
(3) expanding the sectors which are subject to the New NSR Measures compared to the prior NSR regime;
(4) introducing a new NSR authority established under NDRC and jointly led by NDRC and MOFCOM; and
(5) introducing an application process which may be time-consuming and extensive.
In light of these changes, it remains to be seen whether the New NSR Measures will be applied more regularly than its predecessor regime which was rarely invoked.