China's State Council laid out long-awaited rules and procedures for national-security reviews of foreign mergers and acquisitions.
The government's intent to establish a formal process for reviewing national-security issues around international deals has been known since 2008, when new antitrust legislation went into effect. On Saturday, a government statement outlined the specific procedures for the first time.
Under the rules, China's National Development and Reform Commission and the Ministry of Commerce, the two ministries that already review mergers under the antitrust rules, will lead the new national-security-review committee.
The committee will review mergers and acquisitions targeting key companies in the defense, agriculture, energy, resources, infrastructure, transportation and equipment-manufacturing and technology industries, the statement said. It will apply a broad definition of national security, assessing the impact of deals on economic stability, social order and China's ability to research and develop key technologies for national defense, according to the rules.
China's government already has wide latitude to block mergers, with foreign companies facing especially strong scrutiny. The only merger known to have been rejected outright under the antitrust rules was a bid by Coca-Cola Co. to acquire Huiyuan Juice Group Ltd. in 2009. Chinese regulators said the deal could crowd out smaller companies and raise consumer prices, though the two combined held just a fifth of China's juice market. Chinese regulators have attached conditions to several other mergers.
Several planned Chinese acquisitions in the U.S. and Australia have been blocked by those countries on national-security grounds. On Friday, the Wall Street Journal reported that the Committee on Foreign Investment in the United States would likely recommend that President Barack Obama unravel the acquisition of U.S. technology company 3Leaf Systems by Chinese telecommunications-equipment maker Huawei Technologies Co. A decision by CFIUS on the Huawei deal is due Monday.
In its statement Saturday, China said the new acquisition rules, dated Feb. 3, would take effect in 30 days from their announcement.