China FDI control
China FDI control

The following Competition practice note provides comprehensive and up to date legal information covering:

  • China FDI control
  • 1. What is the applicable legislation?
  • 2. Which government or other body (or bodies) reviews foreign investments?
  • 3. What is the scope of the foreign investment regime? Does it only apply to specific sectors or types of investors (eg foreign or non-EU / non-WTO)? Are there specific rules for certain types of investors (eg state-owned enterprises)?
  • 4. What are the triggers or thresholds for the regime to apply? What types of transactions are caught? Is there a minimum level of shareholding or a control test that applies?  Are there any other thresholds that need to be met (eg based on turnover or market shares)?
  • 5. Are there any exceptions that may apply?
  • 6. Is there any discretion to review transactions that do not meet any thresholds for review?
  • 7. What are the grounds for review, eg public or national security or other grounds?
  • 8. What level of discretion do the relevant authorities have to approve or reject transactions? Is there scope for any other body to intervene?
  • 9. Where a transaction is caught by the regime, is notification mandatory and must closing be suspended pending clearance?
  • More...

A conversation with lawyers in the Beijing office of international law firm CMS on key issues on foreign direct investment (FDI) control in China.

1. What is the applicable legislation?

Currently, the key laws forming the regulatory regime on foreign investment are the Foreign Investment Law (FIL) which was passed by the National People’s Congress and the Implementing Regulations of the Foreign Investment Law of the People’s Republic of China (FIL Implementing Regulations) which was promulgated by the State Council. Both of the FIL and the FIL Implementing Regulations were released in 2019 and came into force on 1 January 2020.

Before the FIL and the FIL Implementing Regulations came into force, there were three major laws forming the legal framework of foreign investment review, which were called the Three FIE Laws, with FIE standing for 'Foreign Investment Enterprise'. Under the Three FIE Laws, foreign investment into China was regulated on the basis of the form of corporation of an enterprise. Different requirements on corporate governance had been imposed on the basis of the type of incorporation of an enterprise . All foreign investment into China and subsequent changes required prior and case-by-case approval from Ministry of Commerce or its local branches (MOFCOM).

The introduction of FIL and the FIL Implementing Regulations is a milestone in progress of foreign investment legislation. The FIL and the FIL

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