In addition to competition law reporting requirements, a transaction must be reported to the Ministry of Commerce (MOFCOM) if it results in a change of control of a domestic company and:
- the transaction involves a "key" industry;
- the transaction has or may have an impact on national economic security; or
- the domestic company owns a well-known trademark or a "time-honoured Chinese brand".
This requirement appears to be a reaction to the speed with which foreign investors are moving in on certain Chinese companies in various sectors.
The State Assets Supervisions and Administration Commission (SASAC) has named seven industries it considers key to national security and national economic stability. The seven industries are:
- power generation and distribution;
- oil and petrochemicals;
- aviation; and
While these seven industries were not identified by the SASAC in the context of special MOFCOM reviews, the importance attached to these industries suggests it is almost certain that a special MOFCOM review would be required for any foreign acquisition involving these industries. Other industries may also be considered to be key industries.
Foreign investors tempted to overlook reporting, should note that MOFCOM may terminate a transaction that is not reported and which it considers has a major impact on national economic security. Although a review mechanism is not spelled out, MOFCOM may use its general powers to block or modify a transaction.