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China’s National Security Review of Foreign Investment: A Comparison with the United States

By: Robin Hui Huang

This paper critically examines China’s national security review regime of foreign investment and compares it with that of the United States. Over the years, China has gradually established a comprehensive legal framework for national security review of foreign investment. Recent efforts were made to refine the public enforcement mechanism of the review in tandem with a new “pre-establishment national treatment plus negative list” system under the 2020 Foreign Investment Law. The United States also enacted the Foreign Investment Risk Review Modernization Act of 2018 to enhance its national security review regime.

By analyzing the law and practices of China and the United States, this paper finds that the national security review regimes of the two jurisdictions have functional convergences despite some formal divergences caused by diverse political-economy landscapes. Their functional convergences are highlighted by China’s local practices, such as the de-facto national security screening in the name of anti-monopoly review. There are many factors affecting China’s national security review regime for foreign investment, including the ongoing (and escalating) US-China competition (or conflict) at the international level and the evolution of state or party capitalism at the domestic level. These research findings will not only contribute to the existing comparative law scholarship but also benefit multinational enterprises that seek to enter Chinese and the US markets.

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