China will launch a state-level investment review body to check that merger and acquisition deals struck by foreign firms in one of the world’s fastest-growing economies do not endanger “national security,” China’s State Council, the cabinet, said on Saturday.
The new regulation, which will come into effect in March, is set to install a new red-tape barrier for doing business in China, the world’s second largest economy where double-digit growth has attracted more than $105 billion in foreign direct investment last year.
The review will be conducted by a “foreign investment security review board” under the cabinet. Members of the board will come from the National Development and Reform Commission, the Ministry of Commerce and other agencies on ad hoc basis.
The new body could enable China to turn the tables on some countries that have previously blocked its investments on national security grounds.
China suffered the biggest knock to its deal-making confidence in 2005, when state-controlled oil firm CNOOC Ltd withdrew an $18.5 billion bid for U.S. oil firm Unocal after the Senate moved to block it on national interest grounds.
But Beijing, which introduced an anti-trust law in 2008, has also blocked deals that do not conform with its national plans in the past.
The government wants to consolidate many heavy industries such as steel into the hands of a few big players, and it has blocked several foreign attempts to buy into its huge steel sector, by far the world’s biggest.
