Massive corporate harvest awaits reaping

Under the new rules, only those foreign investments that are related to sensitive sectors－the military-related supplies, important agricultural products, important energy and resources, critical equipment manufacturing, major infrastructure, important transport services, important cultural products and services, key technologies and other important fields affecting China's national security－will be subject to security review.

Business activities resulting in acquisition of effective control over enterprises in sectors identified as sensitive will also be subject to the security review.

However, the measures will have no or negligible impact on foreign investors engaging in manufacturing, services and other sectors dominated by wholly foreign-funded enterprises or joint ventures, said Song Xujun, global partner of the United States-based Kearney Strategy Consultants.

"With national security boundaries for foreign investment defined by the new measures, foreign investors can clearly understand relevant information and better engage in business investment and operations with reference to national security. This move will effectively minimize investment losses caused by lack of transparency or clarity in information," he said.

Song further said the new policy clarifies the security review process for foreign investment, which will enhance the overall transparency and efficiency of review. It also clearly defines the three stages of the security review and the time duration required for each stage. This will significantly improve the transparency and timeliness of the review process.

"This helps resolve problems, if any, quickly for foreign investors, indicating higher facilitation of foreign investment in China."

The measures provide for more detailed procedures and requirement on security review of foreign investment, both direct and indirect, vis-a-vis the old security review mechanism promulgated in 2011, said Bridge Zhao, vice-president and general counsel for Asia-Pacific at the United Kingdom-based Smiths Group, an industrial goods manufacturer with 23,000 employees across operations in 55 countries and regions.