By: Susan Ning and Ding Liang

On 22 December 2010, the Minister of Commerce Chen Deming stated in his annual working report at the 2010 National Commerce Work Conference that the Ministry of Commerce (MOFCOM) intends to combine the following processes: (a) administration of foreign investment; (b) anti-monopoly merger control review; and (c) national security review from next year. 
According to Minister Chen’s report, the main objective in combining the above mentioned processes is to "protect the security of domestic industries".

It is not clear how the processes in (a) to (c) as mentioned above will be combined or integrated.  This article provides a brief overview of how the processes set out above are currently being conducted.

MOFCOM’s general duties

MOFCOM is in charge of managing China’s external economic and trade relations.  Its duties include formulating trade policy, regulating foreign participation in markets, guiding foreign investment, and conducting merger review.

Administration of foreign investment

The foreign investment review process governs foreign companies wanting to invest in China.  Examples of foreign investment include setting up Wholly Foreign Owned Enterprises; setting up representative offices in China and acquiring or merging with local companies.  This review process can be carried out by the local, provincial, or central level MOFCOM.  Smaller transactions are reviewed and approved by the local-level MOFCOM.  Central level MOFCOM reviews large or politically sensitive transactions.

Anti-Monopoly Merger Control Review

The antitrust or anti-monopoly merger control review process is undertaken by central level MOFCOM.  Companies who wish to merger or acquire that meet a certain turnover threshold are required to notify MOFCOM and seek antitrust approval before closing the deal.

National Security Review

Currently, the national security review process shall be conducted by both the National Development Reform Commission (the NDRC) and by MOFCOM together with other goverment agencies.  The source power for the national security review process is located in Article 31 of the Anti-Monopoly Law which states that the antitrust authorities have the power to conduct a national security review in relation to foreign to local mergers and acquisitions.


Again, it is not clear how or to what extent the processes in (a) to (c) as mentioned above will be combined or integrated.  It is also interesting that the objective of combining the three processes is to protect the security of domestic industries.  There are clearly  "protectionistic" underpinnings towards the proposal to combine these processes. 

Overall, we view combining these three processes as a progressive step – towards streamlining processes and getting rid of red tape.  It will be interesting to see how and to what extent these processes will be combined.  Of most concern, as antitrust practitioners is whether these combined processes will lengthen the antitrust / merger control review process.