CELIS Country Note on China, 2023

by Dr Cheng Bian and Mr Charles Ho Wang Mak

Date of Publication 31.07.2023

Abstract

In recent years much light has been shed on Chinese outbound investment, inter alia its
geopolitical, economic and security-related implications in Europe, North America and the
Asia-Pacific regions. Perhaps less attention has been paid to China’s FDI screening system of
its own on the ground of national security. This Note discusses the policy background,
legislative development, and key features of China’s national security review of foreign
investment. Debuted in 2011 and updated in 2020, China’s national security review
mechanism for foreign investment has been up and running for more than a decade. However,
very little information has been known to the public as to how the system is enforced in practice.
In addition to the lack of transparency, China’s national security review of foreign investment
also repels any form of administrative or judicial redress, which is a development not in
conformity with prevalent international practices. One may argue that the distinct features of
China’s investment screening on the ground of national security, compared with other
jurisdictions monitored by the CELIS project, are ultimately attributed to China’s unique
economic and governance models.