by Henry L.T. Chen, Frank Schoneveld and Brian Fu

On 3 February 2011, the State Council promulgated the “Notice of the General Office of the State Council on Launching the Security Review Mechanism for Mergers and Acquisition of Domestic Enterprise by Foreign Investors,” which established the national security review system for merger and acquisition (M&A) transactions by foreign investors in China.  On 25 August 2011, after a trial implementation period of about six months of an interim regulation on the security review system, the Ministry of Commerce finalised and issued the “Regulation on Implementing of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,” which came into effect 1 September 2011.  The national security review system as established and specified under the notice and the regulation may have a broad impact on prospective M&A transactions by foreign investors in China.

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