President Trump today signed the Foreign Company Accountability Act, which is seen as a reference to the Chinese Communist Party. China’s National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) jointly announced later in the evening the “Measures for Security Review of Foreign Investment”, indicating that foreign investment cases involving national security will be reviewed.
According to an afternoon announcement on the official website of China’s National Development and Reform Commission, the measures consist of 23 articles, which stipulate the types of foreign investment subject to review, review bodies, review scope, review procedures, supervision and implementation of review decisions and handling of violations.
The measures provide that security reviews will be conducted for investment in military industry, military industry support and other areas related to national defense security, as well as for investment in military facilities and military facilities around the region.
In addition, investment in important agricultural products, energy and resources, equipment manufacturing, infrastructure, transportation services, cultural products and services, information technology and network products and services, financial services, critical technologies, and other important areas, and obtain the actual control of the invested enterprise foreign investment cases, must also be subject to security review.
Measures also mentioned that Hong Kong, Macao and Taiwan investors to make investments that affect or may affect national security, also refer to the provisions of this approach.
This approach requires that foreign investors or domestic related parties should take the initiative to declare investments that fall within the scope of the review before the implementation of the investment. For foreign investments that should be reported but not reported, the Office of Foreign Investment Security Review Mechanism has the right to request a deadline for declaration.
The measures also mentioned that the relevant authorities, enterprises, social groups, the public, etc. can also propose a review to the Office of the Working Mechanism.
According to the measures, the security review of foreign investment will be divided into three stages. In the preliminary review stage, the authorities will decide whether to initiate a security review within 15 working days from the date of receipt of information meeting the declaration requirements; followed by a general review, with a decision to pass the review within 30 working days from the date of initiation of the review, or proceed to the next stage of review according to the procedures.
The third stage is a 60-working-day special review, which is not mandatory for every investment case, and only investment cases that do not pass the general review will proceed to the special review; the time limit for the special review may be extended in exceptional cases; a decision will be issued at the end of the special review. During the review period, the time for additional information will not be counted as part of the review period.
The measures also said that for violations such as “refusal to declare, falsification, non-implementation of additional conditions”, the person may be ordered to dispose of equity or assets for a limited period of time, and “may also incorporate its bad credit record into the relevant national credit information system and implement joint disciplinary action in accordance with relevant national regulations.
The announcement shows that China established a working mechanism for foreign investment security review, the working mechanism office is located in the National Development and Reform Commission, led by the National Development and Reform Commission, the Ministry of Commerce, to undertake the day-to-day work of foreign investment security review. This approach will be officially implemented 30 days after the date of announcement.
It is worth mentioning that before the announcement of the above measures, Donald Trump (DonaldTrump) officially signed the “Holding Foreign Companies Accountable Act” (HFCAA) into effect on the 18th EST.
This law stipulates that companies listed in the U.S. must prove that they are not controlled or held by foreign governments; if they do not cooperate with the U.S. Public Company Accounting Oversight Board (PCAOB) for three consecutive years, they will be prohibited from listing their securities on the U.S. stock exchange. If a company fails to cooperate with the U.S. Public Company Accounting Oversight Board (PCAOB) for three consecutive years, it will be prohibited from listing its securities on the U.S. stock exchange.
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