China’s State Council Issues Notice on National Security Review of Foreign Acquisitions

On March 5, 2011, a new national security regime regulating foreign acquisitions of Chinese enterprises will enter into force. This regime was created by a Notice on Establishing Security Review Mechanism regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “Notice”) issued by the General Office of China’s State Council on February 3, 2011. Similar regimes exist in other jurisdictions, including Australia, Canada, Germany, Russia and the United States. As with many Chinese rules, however, the Notice is opaque and discretionary and seems likely to result in uncertainty.