China is setting up a panel that will review acquisitions of local companies by foreign investors for potential security threats, according to Bloomberg. The goal of the panel is to prevent any mergers or acquisitions of Chinese firms that it deems a risk to China’s security.
Investors believe this will be a bureaucratic hindrance and will violate the country’s free-trade agreements. This move follows China’s own struggles with foreign acquisitions.
In 2005, China National Offshore Oil Corporation (CNOOC) lost an $18.4 billion bid for Unocal after the Senate raised concerns over national security.
More recently, a report by the US-China Economic and Security Review found that investments from China’s burgeoning telecommunications sector could pose a national security risk to the U.S. by giving the country access to sensitive technology that could be used for espionage.
In 2009, China dropped its bid for a majority stake in Australia’s Lynas Corp which owns the world’s richest deposit of rare earth minerals, because of stringent rules set up by the Australian Foreign Investment Review Board, according to Reuters.
China had $105 billion in foreign direct investment last year.