China’s Ministry of Commerce to scrutinize foreign investment more closely

on Jul9
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China’s Ministry of Commerce Spokesman Gao Feng addressed reporters at a regular press conference on April 29, 2021 in Beijing, China.

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BEIJING — China’s Ministry of Commerce plans to scrutinize foreign investment more closely on the basis of national security.

The ministry’s priorities for the next five years — released publicly this week — include reference to the “Measures for Security Review of Foreign Investment” that took effect in January. These measures generally require pre-review of foreign investment plans related to the Chinese military, and important agriculture, energy and technology products.

While the brief mention of the review system — on page 43 of the 46-page document — doesn’t necessarily represent new action by Chinese authorities, the reference does indicate foreign investment into China can face greater scrutiny.

In the last few years the U.S. has increased its scrutiny of Chinese investment in the country, although American businesses have faced far more restrictions on where they can invest in China.

In a section about preventing risks form foreign investment, the commerce ministry said it would “improve the national security review system for foreign investment, and open security investigations into foreign investment that affects or could affect national security.” That’s according to a CNBC translation of the Chinese text.

However, the ministry also said it would expand the areas that foreign capital could invest in, including strategic areas such as telecommunications, the internet, education and health care. The ministry said it would further relax the ability of foreigners to make strategic investments in publicly listed companies.

The document follows the release of the central government’s 14th five-year plan in March. Beijing issues such economic development priorities every five years, and government departments and local authorities subsequently release details on how they plan to implement national goals.

The Ministry of Commerce plan noted the need to respond to the impact of trade tensions with the U.S., while increasing collaboration with U.S. states and local governments.

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The ministry forecast average annual growth of 5% in retail sales through 2025, with the portion sold online growing at a slightly faster 7.6% pace. Imports and exports of goods will likely grow an average of 2% a year through 2025, the plan said.

Overall, the ministry emphasized how it would work to build up China’s domestic market, in line with Beijing’s “dual circulation” plan.

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