Investment reviews to facilitate opening-up

Visitors enjoy night views of Hongyadong from the Qiansimen Bridge over the Jialing River in Chongqing. [Photo by Wang Zhuangfei/China Daily] 

In the current international geopolitical climate, the rules for national security reviews of foreign investments the Chinese authorities have just released may be construed quite differently to how they are intended.

But there is no need to over-interpret them.

The reviews, which will be conducted for foreign investments in military sectors and the acquisition of controlling stakes in such sectors as energy, natural resources, agriculture, internet technology and financial services, are in line with international practice and will help balance the economic benefits of further opening up with the need to ensure national security.

The investment reviews are not protectionism or backtracking from opening-up policies, as they would not be of service to China if they were to be employed as a mere political expediency.

Conducting national security reviews of overseas investments that might undermine the country's security interests is a normal and universal international practice. China established its own security review system for overseas investment in 2011, way before national security became a prominent stumbling block for Chinese companies' overseas expansion.

Rather than serving tit-for-tat trade conflicts, the rules introduce transparency, which is essential in a rules-based international environment.

The 23-article document defines the categories of overseas investment subject to a security review along with the institutions in charge of the reviews — there is to be a dedicated body, headed by the National Development and Reform Commission and the Ministry of Commerce — as well as the scope of a review and the procedure, the implementation and the consequences for any violation.

With this level of clarity, overseas investors will no longer find themselves operating in the dark when it comes to the long mysterious grey area of "national security".

The new rules are based mainly on the Foreign Investment Law that came into effect this year and the National Security Law, and are meant to coordinate development and security.

If, thanks to the peculiar veil of secrecy that naturally surrounds national security, the National Security Law once led some to worry about potential abuses in an opaque environment, the new rules on national security reviews should be conducive to making things clearer, and dispelling misgivings. According to the authorities, the new rules are aimed at effectively preventing and resolving national security risks while better protecting overseas investment and opening-up.

Like any other country, China has reason to be concerned about potential national security risks overseas investment might bring. But at the same time, it wants to facilitate, rather than obstruct, high-level opening up. Publishing the rules is a sign that it is more aware of and willing to conform to the rules-based order.