National Security Review of Foreign Investment in China: Rule of Law in Ambiguity

China formally adopted its national security review regime of foreign investment in 2011, which has been updated by the ‘Measures for National Security Review of Foreign Investment’ in 2020. The review mechanism has been developed in the context of China’s attempt at, and practice of, a radical reform of its foreign direct investment (FDI) regulatory regime at large and market access liberalisation in particular, inter alia, a transition from the previous case-by-case review of all foreign investment to currently a principled national treatment in the pre-establishment phase. As a result, the regulatory system has evolved from a generic and catch-all review, to all foreign investment based on implicit and unspecified regulatory objectives, to a review only towards those foreign investment projects that may pose a threat to national security, thus showing more deference to the rule of law. However, this transformation is accompanied by residual ambiguities and vagueness in the current national security review system, some of which may seriously impede an effective enforcement of the review system or give leeway for circumvention of the review. To that end, revision proposals are provided in this article to further clarify the law in order to reduce those procedural ambiguities that go against the fundamental principles of the rule of law.