Comparative Research Between Chinese And American National Security Review System Of Foreign Capital’s Merger And Acquisition

Along with the further development of globalization, transnational merger and acquisition(M&A) is becoming a indispensable role in the economic market. The extensive application of foreign capital’s M&A benefits from its win-win results. However, gradually heating up of transnational M&A causes general attention on national security problem from almost every country.The introduction part of this paper shows the developing trend of transnational M&A through some charts. According to the analysis, we can see that although foreign M&A is increasingly important in the global market, it is also a "double-edged sword".We should not be able to ignore its disadvantages, which there exist the possibility of national security threat.By introducing two cases, Carlyle and Xugong M&A case and CNOOC and Unocal M&A case, the first part of this article puts forward the necessity of building up national security review system of foreign capital’s M&A. After the Carlyle and Xugong M&A case, the public in our country had a intense argument on how to make full use of foreign capital, whose attitude experiencing a gradual variation from blindly using to rationally. And accumulate persons face up to the construction of national security review system of foreign capital’s M&A. However, there are a plenty of problems waiting for us to deal with. For instance, how to build up this kind of system? Is there any history to pursue in our own country? Do we have any widely accepted targets when countries formulate relevant laws and regulations? How about the efforts and practices of international organizations? In addition, how the U.S. constructs this kind of system? Does it fully comply with international goals? Is there any experience for China to learn? Compared with the U.S., is our country’s currently existing system perfect? And if not how to improve? This article is dedicated to figure out the answers to these questions.The next part focuses on discussing the developmental evolution of national security review system of foreign capital’s M&A.In order to guide the healthy and orderly development of foreign capital’s M&A and safeguard national security, on3February2011, the General Office of the State Council issued "Notice on the Establishment of a Security Review System for Merger and Acquisition of Domestic Enterprises by Foreign Investors"("Notice"). It signifies the starting of an official building of national security review system of foreign capital’s M&A in China. Nevertheless, it does not mean that our country make no efforts in this area before. The process of this construction in our country has experienced three stages---preliminary construction, development and improvement, and we are in the third period. Comparatively speaking, national security review system of foreign capital’s M&a in the U.S. is quite perfect. The continually publishing of relevant laws and regulations, such as "Exon-Florio Provision","Foreign Investment and Naional Security Act of2007","Regulations Pertaining to Mergers, Acquisitions and Takeovers of2008" and "Guide on the implementation of the national security review by CFIUS of2008", makes the U.S. Government establish a very specific and complete national security review system of foreign capital’s M&A.However, nothing is perfect, so as this kind of system in the U.S.. The third part of this paper introduces the generally recognized international goal in order to make clear about shortcomings of the relevant American system and figure out how to perfect our country’s related system. In May2009, OECD promulgated "Guidelines For Recipient Country Investment Policies Relating To National Security" to help countries to design and implement a properly effective national security review system of foreign capital’s M&A. To maintain the balance between the economic interests and national security, there are four principles to obey:Non-discrimination, Transparency/predictability, Regulatory proportionality and Accountability.And then, the fourth part compares the current related laws and regulations between China and the U.S. from the following four aspects:review bodies, review procedures, review objects and review standards. And every comparison section has a short summary about how to learn American experience.Last but not least, the fifth part expounds the pros and cons of American national security review system of foreign capital’s M&A based on the guidelines of OECD. Moreover, it also points out the non-compliance of Chinese current related system with the guidelines of OECD according to the analysis in the forth part, such as (1) the lack of important concepts, such as "national security";(2) the identification standard of "actual control" is relatively obscure;(3) the lack of review bodies’ accountability system;(4) the boundaries between foreign capital’s M&A review measures and industrial policy measures are vague and so on. In the final discussion, this paper also involves in how to improve Chinese relevant system. There are some directions we should pay more attention on, for instance, the authority of review bodies, the integrity of review process, the diversity of supervision mechanism, the guidance of review objects and the clarity of review standards.