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The main piece of legislation regulating foreign investment in China is FIL 2020. It applies to:

  • registration of enterprises with FDI in China;
  • acquisition of shares of Chinese companies;
  • investing in new projects in China;
  • other investments provided for by Chinese laws.

Investing in Chinese economy requires foreign investors to provide financial regulators with all the necessary information. Foreign investors are forbidden to invest in sectors included in the Negative List. Investing in other sectors requires licensing & compliance with administrative & national security requirements. In specific sectors (e.g. military, agriculture, energy & resources, etc.), conducting M&A transactions in the PRC requires passing a security review.

Enterprises set up with FDI must be registered with relevant market regulators. Investing in certain sectors requires obtaining approval from relevant regulators. A national security audit may be required for concluding an M&A deal in China in specific sectors (e.g. military, agriculture, energy & resources, etc.). 

How to Apply for Authorization

Foreign investors seeking to conclude an M&A deal in China must apply to the NDRC for a national security audit. They’ll be required to submit the following documents:

  • description of a transaction along with a request for a national security audit;
  • ID/registration certificate & properly notarized credit certification documents;
  • ID of an authorized representative or a PoA issued to an authorized representative;
  • description of a foreign investor & their subsidiaries;
  • description of a Chinese company to be taken over, AoA, license (photocopy), audited financial statements, organizational charts before & after an M&A deal, licenses (photocopies) of companies in which investments are made;
  • agreements to be created after an M&A deal, a list of BoD members appointed by stakeholders & CEOs;
  • agreements on transfer of shares, decisions of shareholders' meeting & asset valuation reports;
  • written consent of a title owner to the sale of assets, an agreement on the sale of assets, information on all parties to an agreement & related asset valuation reports;
  • other documents required by the Commerce Department.


Registering a company for investment activities in the PRC requires passing several security verification stages. After receiving an application for verification, the NDRC is to issue its preliminary decision. If an audit is necessary, an applicant is sent a written notification within two weeks; after an applicant is notified, an application for a joint ministerial meeting is to be sent within five business days. If no threat to national security is identified within a 30-day review period, an M&A deal is authorized. If not, a 60-day review procedure is initiated.


Those considering obtaining permission to invest in Chinese companies should keep in mind that they may be required to terminate a transaction or transfer shares/assets if its execution threatens national security.

Appealing a Decision

A decision regarding a national security audit is final & cannot be appealed.

Confidential Information

Disseminating confidential information obtained in the course of an M&A transaction in China is prohibited. Penalties for violating confidentiality include disciplinary action & criminal charges if a violation has caused significant damages.


Looking to set up an investment business in China? Need advice on national security risk assessment as per FIL 2020? Please, consider contacting IQ Decision UK.