Key Considerations ^ China has introduced several national security-driven regulations over the last decade, including a revamped foreign investment regime, a foreign investment screening body and a list mechanism pursuant to which non-Chinese individuals and entities can be restricted or prohibited from investing in China. ^ Under the foreign investment regime, a screening body has broad authority to review both direct and indirect investment activities by non-Chinese investors, including for investments in “important” industries such as energy, infrastructure and critical technology. In April 2026, the screening body issued its first publicly disclosed prohibition, blocking a proposed foreign acquisition of a China-origin artificial intelligence company that had been restructured offshore – a landmark development signaling the regime’s transition from a legislative framework to active, public enforcement. ^ The 2020 Unreliable Entity List (UEL) illustrates China’s ongoing willingness and ability to target specific actors seen to be endangering Chinese sovereignty or development interests, potentially through compliance with non-Chinese law (e.g., economic sanctions). In April 2025, Chinese authorities designated an additional 17 U.S. defense firms to the UEL, though implementation was initially suspended for 90 days beginning May 2025 pursuant to a bilateral trade consensus, and was subsequently adjusted, including selective extended suspensions later in the year or permanent terminations. ^ The Chinese Securities Regulatory Commission (CSRC) further clarified its national security oversight role in respect of overseas fundraising, including public listings, by domestic enterprises in new interim measures. ^ China’s 2025 Catalogue of Encouraged Industries for Foreign Investment (effective February 1, 2026) and updated Market Access Negative List reflect continued liberalization in strategic sectors, even as national security enforcement has become more assertive. ^ Non-Chinese investors should continue to anticipate a complex regulatory landscape for investments in China.
FDI Regime Overview China has introduced several national security- driven regulations over the course of the last decade, including several recent measures with respect to non-Chinese investment. In 2020, a revamped Foreign Investment Law (FiL) was implemented to overhaul China’s foreign investment regime. The FiL anticipated the Measures on National Security Review of Foreign Investments (Review Measures) and established a
new foreign investment screening body in China effective from January 18, 2021, the Office of the Working Mechanism for Foreign Investment Security Review (“FISR”) that is led jointly by two of the country’s preeminent regulators: the National Development and Reform Commission and the Ministry of Commerce (MOFCOM). In addition to the Review Measures, MOFCOM also promulgated the Provisions of the Unreliable
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FDI and National Security Review
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