? Key infrastructure
? Key transportation service
? Key technology
? Key equipment manufacturing
The attached conditions for these other industries are a) they are related to the national security, and b) the foreign investor may obtain the controlling power or majority of the target enterprises involving the above industries.
As we discussed above, the Chinese regulators do not absorb energy and natural resource to the concept of national security, but regulate it as a special industry which may be subject to the national security review if the Deal meets the two conditions. Although this is not a wise choice for the Chinese regulators, it leaves opportunity for foreign investors in the traditional and especially the new and renewable energy industries and natural resource industry.
The Security Review Rule sets out the types of the Deal, i.e. the assets and equity M&A, similar to the clarifications in the Provisions for Foreign Investors to Merge Domestic Enterprises (2009 Provisions). Moreover, the difference between the Security Review Rule and the 2009 Provisions is that the existing foreign investment enterprises in China are included as a target company in the Security Review Rule. It also uses the Corporate Law of China and the guidelines to the listing companies as the basis to define the "controlling power"(or majority).
The Regulator of National Security Review
As authorized by the Security Review Rule, the inter-ministry panel (the Panel) will be set up and responsible for the national security review of the Deal. This Panel will be lead by the SDRC and MOFCOM and composed of the other ministries where the Deal is related to, such as the MOD, MIIT, MLR, MOT, MOR, MOST and MOA, etc.
We believe that MOFCOM will play a key role in this review due to its familiarity with the concentration review and the approval of foreign investment. But we still need to see how the work will be internally assigned between the Anti-monopoly Bureau (the AMB) and the Department of Foreign Investment Administration (the DFIA) in the MOFCOM. As shown on the website of the AMB and the DFIA, the Security Review Rule has been published on the webpage of the DFIA, but not the AMB. It seems that the DFIA will take the responsibility of national security review and the AMB will focus on the concentration review. In any event, both of them need clarify their relationship and cooperation in the coming workload. We also note that the Minister of MOFCOM said at the end of 2010 that MOFCOM will combine the procedures of foreign investment approval, anti-monopoly review of the concentration of undertakings and the security review of the Deal. For the foreign acquirer, it is necessary to consider the strategy of which procedure should be started first in order for successful pass of all the approvals and reviews at this stage.
