the UEL Provisions allow for Chinese entities and individuals to apply for special exemptions where it is necessary for the Chinese applicant to transact with a designated entity. The Chinese party may continue to transact with the designated entity pursuant to the terms and conditions of an issued approval.
The general impression in China is that the Chinese government’s purpose in applying the UEL is in response to sanctions imposed by foreign governments.
Outlook for 2026 China has issued a raft of sweeping measures over the course of the last several years that will significantly impact non-Chinese investors and the Chinese market. These have developed against the backdrop of Beijing’s long-term policy goals of moving up the technology ladder through industrial policy and rebalancing its economy through increased domestic consumption and self-reliance (e.g., Dual Circulation). These policies aim to advance the economy while weathering an external environment increasingly perceived to be hostile and avoiding being trapped as a middle-income country. Increased urgency has been added to this trend against the backdrop of Beijing’s “no limits” alliance with Moscow and growing diplomatic confidence. The country’s emerging foreign investment regime is a part of Beijing’s broader economic strategy and overall drive to exert national security-based controls over private actors, whether foreign or domestic. In recent years, Chinese regulators have expanded national security-based oversight while gradually liberalizing the negative list to attract foreign investment in strategic sectors. The foreign investment screening process has been more structured under the Review Measures, while parallel developments such as the UEL illustrate Beijing’s willingness to apply reciprocal pressure in response to foreign actions targeting Chinese interests. Throughout 2025 and into 2026, Chinese authorities introduced several key policy developments aimed at enhancing the foreign investment climate. In March 2024, the State Council issued the Action Plan to Solidly Promote High-Level Opening-up and Vigorously Attract and Utilize Foreign Investment, which included commitments to reduce market access restrictions, improve tax and financial support, optimize public procurement and government services, and facilitate cross- border flows of data and personnel. In September 2024, the National Development and Reform Commission and MOFCOM jointly released the 2024 version of the Negative List for Foreign Direct Investment, which removed access restrictions in the manufacturing sector. In November 2024, amendments to the Measures on foreign investors’ strategic investment in listed companies of China were jointly published by MOFCOM and five other Chinese governmental authorities. In February 2025, the National Development and Reform Commission and MOFCOM jointly released the 2025 Action Plan to stabilize Foreign Investment, which aims to orderly expand independent opening up, improve investment promotion level, enhance the effectiveness of open platforms and increase service support. These changes lowered entry thresholds, allowed foreign individuals to participate in strategic investments, expanded permitted payment mechanisms (including foreign private shares) and relaxed shareholding and lock-up requirements.
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FDI and National Security Review
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