China Launching Body To Screen Foreign Investment

Foreign enterprises that try to buy Chinese companies will face a more stringent national security review, AP reports:

The government will review proposed acquisitions in fields including energy, farming, transportation, heavy equipment manufacturing and “key technologies,” the Cabinet said in a weekend announcement. Reviews will apply to an offer to acquire at least 50 percent of a Chinese company.

The measure appears to go beyond a traditional national security review and involves looking at factors such as the impact on the economy and social stability, according to James Zimmerman, a lawyer in Beijing for the firm Squire Sanders & Dempsey LLP.

“Such a review adds a layer of bureaucratic intermeddling into commercial and economic terms that have no real impact on China’s defense policies,” Zimmerman said in an e-mail. He said regulators will have “discretion to quash legitimate foreign investment transactions for protectionist reasons.”

Beijing has complained that national security objections in the United States and other countries have blocked Chinese acquisitions.