The NPC Standing Committee has passed a new National Security Law. The new law is effective from 1 July 2015.
National Security Law requires state to safeguard key economic interests
The new law requires the state to safeguard key economic interests including industries that are vital to the national economy, key industrial sectors, key infrastructure projects and key construction projects (Article 19).
The law identifies the following industrial sectors:
Finance.
Resources and energy.
Food safety.
Culture.
Technology.
Cybersecurity.
Ecological and environmental protection.
Nuclear technology.
Exploration and utilisation of outer space, international seabed areas and polar regions.
Apart from the industrial sector, a connection to terrorism, extremism or religious affairs are also specified as factors that can bring a matter within the ambit of the new law.
New constitutional legislation on the national security regime passed
The National People's Congress (NPC) Standing Committee (全国人民代表大会常务委员会(全国人大常委会)) promulgated the National Security Law of the People’s Republic of China 2015 (2015 National Security Law) on 1 July 2015. The law overhauls the national security review (NSR) process in China (PRC) (中国(中华人民共和国)).
The new law defines national security for the first time as comprising a status under which the following are relatively free from danger, international and domestic threats and the ability to maintain security on a continuous basis:
The State's political regime, sovereignty, unity and territorial integrity.
The welfare of the people.
Sustainable economic and social development.
Other significant national interests.
(Article 2)
NSR mechanisms will apply for foreign investment, technology, network IT and construction projects
The new law requires the state to establish an NSR mechanism for matters that affect or may affect national security, including:
Foreign investment.
Network IT products and services.
Construction projects.
(Article 59)
The government also reserves the right to specify matters or key technologies for which NSR mechanisms must be established, and to establish mechanisms for any other “major activities that have national security implications”.
In May 2015, China adopted a more extensive and sophisticated NSR regime for all foreign investment activities in China’s free trade zones (FTZs). Inside the FTZs, all foreign investments in the FTZs that have national security implications must undergo NSR, whether they are structured as:
The establishment of new enterprises (also called greenfield investment).
Mergers or acquisitions of existing enterprises.
Other investments, such as contractual arrangements (for example a variable interest entity (VIE) structure), share entrustment, trust, reinvestment, overseas transaction, lease or subscription of convertible bonds.
(Notice of the General Office of the State Council on Printing and Distributing the Trial Measures for the National Security Review of Foreign Investment in Pilot Free Trade Zones 2015.)