You can screen whether China's foreign-investment security review (FISR) applies to your deal in four questions — before you commission diligence or sign a term sheet. The rule is sector plus control: the review bites where a foreign investor takes actual control of a target in a listed sensitive sector, or invests in the defence field at all. If your answers trend toward “yes,” treat a mandatory pre-closing filing as part of the deal and build its timeline in from the start. This is the fast screen; for how the regime works and how it has been enforced, read our full overview of China's security review.
- The test is sector plus control. Outside defence, review attaches only where a foreign investor takes actual control of a target in a listed sensitive sector.
- Defence is automatic. Any foreign investment in the military or defence-adjacent field is reviewed regardless of stake size or control.
- “Actual control” has concrete tests. 50% or more of the equity, a smaller stake with material influence over the board or shareholders, or veto rights over key matters.
- Filing is mandatory and comes before closing. You declare before you implement; non-filing is not a shield.
- An offshore structure doesn’t settle it. The provenance of the technology and team can pull a redomiciled, China-rooted target back into scope.
- If any answer is “maybe,” screen in. Build 15 + up to 30 + up to 60 working days into the calendar and take advice on the facts.
The logic: sector plus control
China's Measures for the Security Review of Foreign Investment took effect on 18 January 2021, administered by a working mechanism jointly led by the NDRC and MOFCOM with its office housed in the NDRC. The regime asks two things of an inbound deal: what sector the target sits in, and whether the foreign investor takes control. Except in defence — where control is irrelevant — neither element decides it alone; both have to line up. Run the four questions below in order: a clear “no” at Question 1 or Question 3 usually takes you out, a “yes” at Question 2 puts you in whatever your stake, and a “yes” at Question 4 puts an in-sector deal in scope.
Question 1 — Is this a foreign investment into China?
Start at the threshold. The review applies to inbound investment by a foreign investor into China — whether by greenfield entry, acquiring equity or assets, or any other means of gaining an interest in a Chinese business. It reaches investment routed through an offshore vehicle, so a Cayman or Singapore holding company in the chain does not, by itself, take you outside the regime. If there is no foreign investment into a Chinese business at all, the FISR does not apply and you can stop. If there is, keep going.
Question 2 — Does it touch the defence field?
This is the shortcut branch. If the target is in the military or defence-adjacent field — the defence industry, military-supporting facilities, or businesses near sensitive military sites — the review applies regardless of how much you buy or whether you take control. A minority stake does not save you here. If defence is anywhere in the picture, assume a mandatory filing and jump to the sequencing step. If not, move to the sector-and-control questions.
Question 3 — Is the target in a listed sensitive sector?
Outside defence, the review only reaches specific fields. The Measures list important agricultural products, important energy and resources, important equipment manufacturing, critical infrastructure, important transport services, important cultural products and services, important information-technology and internet products and services, important financial services, and key technologies. In practice, semiconductors, artificial intelligence and data-security businesses draw heightened scrutiny. The categories are drawn in broad strokes and left deliberately open, so read them widely, not narrowly — a buyer cannot self-clear on the view that its target is “just software” or “not strategic.” If the target plainly sits in none of these, exposure is low; if it is in or near one, go to the control question. Our four-filings checklist shows where this sits among the other approvals a deal must clear.
Question 4 — Do you take actual control?
For the sensitive sectors (not defence), review attaches only if the foreign investor acquires actual control — the pivot on which many deals turn. Control is met where the investor:
- holds 50% or more of the target's equity;
- holds less than 50% but has voting rights that can materially influence board or shareholder resolutions; or
- otherwise has decisive influence over the target's business decisions, personnel, finance or technology — including veto rights over key matters.
A genuine passive minority — no board control, no blocking rights, no decisive influence — may fall outside. But control is assessed on substance, not the headline percentage, so protective rights negotiated into a shareholders' agreement can tip a “minority” deal into control. If you take control of a target in a listed sector, you are in scope.
If you screen in: sequence the filing before you sign
Screening “in” changes how you run the deal, not just what you disclose:
- File before you implement. The declaration is mandatory and pre-closing — parties must not complete a covered investment before clearance. Non-filing is not a shield: the office can examine a deal that was never declared, and a covered transaction closed without clearance can be ordered unwound.
- Build in the timeline. After a complete filing, the office decides within about 15 working days whether to review; a general review runs up to a further 30 working days, and a special review up to another 60, extendable — realistically two to six months for contested matters.
- Trace provenance, not just the cap table. Where a target has Chinese technological roots, map where the core technology and team originated. A high-profile 2026 decision confirmed the regulator will look through an offshore holding structure to the origin of the technology, so redomiciling abroad does not, by itself, place a deal outside China's reach.
- Price the tail risk. For borderline targets, allocate the risk of a post-closing review in the deal terms rather than discovering it after money has moved.
Security-review exposure is one of several China-specific gates a cross-border deal has to clear. We help foreign buyers map and sequence them from the term-sheet stage — see our cross-border M&A practice, and the full overview for how the review has actually been enforced.
Frequently asked questions
Run two questions. First, is the target in the military or defence field (reviewed regardless of control), or in a listed sensitive sector — important agriculture, energy, equipment manufacturing, infrastructure, transport, cultural products, information-technology and internet, financial services or key technologies? Second, does your deal give you actual control? If a sector question and control are both yes, assume a mandatory pre-closing filing and take advice on the facts.
Outside the defence field, only an investment that gives the foreign investor actual control triggers review. A genuinely passive minority — no board control, no blocking or veto rights, no decisive influence — may fall outside. But control is judged on substance: a sub-50% stake with material influence over the board, or veto rights over key matters, can still count as control. In the defence field, review applies regardless of stake size.
It is mandatory for covered deals and must be made before the investment is implemented — that is, before closing. Parties must not complete a covered transaction before clearance. Non-filing is not a shield: the office can examine a deal that was never declared, and a covered transaction closed without clearance can be ordered unwound.
Not by itself. A high-profile 2026 decision confirmed that the regulator will look through an offshore holding structure to the origin of the technology and team. For a target with Chinese technological roots, redomiciling to Singapore or elsewhere does not place the deal outside China's reach, so diligence should trace where the core technology and people originated, not just the current place of incorporation.
After a complete filing, the office decides within about 15 working days whether a review is needed. A general review then runs up to a further 30 working days, and a special review up to another 60 working days, extendable in complex cases. In practice, straightforward matters clear in two to three months, while cases entering general or special review can take six months or more — so the timeline belongs in the deal calendar from the start.
Sources
- Baker McKenzie — China enacts new foreign-investment security-review Measures: the NDRC/MOFCOM working mechanism, covered sectors and the mandatory pre-closing declaration (effective 18 January 2021).
- International Bar Association — FAQs on the National Security Review of Foreign Investment in China: what triggers review, the definition of actual control (including minority stakes with veto rights), and the 15 / 30 / 60 working-day timeline.
- Internal: China's foreign-investment security review — full overview; The four filings behind a China acquisition.
This article is general information for foreign companies, not legal advice on any specific matter. Rules and practice change; please take advice on your facts.