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

China 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 based on national security.

One of the Ministry’s priorities for the next five years – published publicly this week – is a reference to the “Foreign Investment Security Clearance Measures” that came into force in January. These measures generally require prior review of foreign investment plans related to the Chinese military and key agricultural, energy and technology products.

While the brief mention of the screening system – on page 43 of the 46-page document – does not necessarily represent new measures taken by the Chinese authorities, the notice suggests that foreign investments in China may be scrutinized.

In recent years, the US has stepped up its scrutiny of Chinese investments in the country, even though American companies have faced far more severe restrictions on where to invest in China.

In a section on Avoiding Foreign Investment Risks, the Commerce Department said it would “improve the national security review system for foreign investments and launch security investigations into foreign investments that affect or may affect national security.” That comes from a CNBC translation of the Chinese text.

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

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

The Department of Commerce’s plan highlighted the need to respond to the effects of trade tensions with the US while increasing cooperation with US states and local governments.

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The ministry forecasts average annual retail sales growth of 5% through 2025, with the proportion sold online growing slightly faster at 7.6%. Imports and exports of goods are expected to grow by an average of 2% per year through 2025, the plan says.

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

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