On National Security Review Of Mergers And Acquisitions By Foreign Investors

With the in-depth development of economic globalization, recently theinternational investment is becoming more and more liberalized. The total amount ofcross-border investments is increasing unprecedentedly and the pattern of investmentis gradually changed from Green-Field investments into Mergers and Acquisitions byforeign investors (the “Foreign M&A”). According to relevant statistics, theproportion of Foreign M&A in the whole Foreign Direct Investment (“FDI”) was upto70%in2010. Foreign M&A may bring benefits to enterprise on one hand, but onthe other hand, it may cause a range of issues or threats to national security ineconomic, legal and social aspects as well, especially in certain sensitive areas.There is an increasing number of Foreign M&A cases aroused in China. In orderto effectively regulate Foreign M&A transactions, the General Office of the StateCouncil promulgated the Notice on the Establishment of the Security Review Systemfor Mergers and Acquisitions of Domestic Enterprises by Foreign Investors onFebruary3rd,2012, which signify that the national security review system of ForeignM&A has been formally established in China. However, we have to admit that thenational security review system in China, compared to those of developed countries,is still at a preliminary stage. In hence, there are many aspects need to be improved. To solve such problem, this thesis mainly analyzes the national security reviewsystem both of China and the United States of America (the “United States”) with thecomparative study method from the point view of the legislation and actual practice.The above said analysis is focused on the four aspects: source of law, the standard, theauthority as well as the procedures of the national security review. Through suchanalysis, it is found that there are some similarities of the review system of the UnitedStates and China, while the system of Unite States is relatively more flexible andparticular. In addition, this thesis points out and discusses some prominent problemsof the national security review system of China, and proposed relevant solutions. Thisthesis is divided into three chapters and the summary of each chapter is as follows:Chapter I analyzes the necessity to establish the security review system ofForeign M&A. This Chapter firstly defines basic but important concepts in securityreview and introduces the statues of the Foreign M&A in several countries includingChina. Subsequently, this Chapter lies down the basis of analysis of the negativeimpact incurred to the host country by Foreign M&A, and carries out the in-depthstudy to the necessity and rationality of security review system.The Chapter II carries out a comparative study of the legal system of the UnitedStates and China on the above said four aspects. This Chapter is the core section ofthe whole thesis in which the certain problem with respect to the security reviewsystem on Foreign M&A and relevant feasible solutions are discussed in detail.The Chapter III analysis the respective relationship among the national securityreview system and anti-monopoly review system, industrial policy and investmentliberalization, all of which are closely linked with Foreign M&A transactions. Therelationship between the security review system and anti-monopoly review system isthe key content of this Chapter. Because the above-mentioned systems are oftenconfused by people in practice, this Chapter also analyzes the differences betweenthem and the way to balance and implement them in Foreign M&A transactions.