A NEW regulation issued by China's Ministry of Commerce yesterday states that the government will review mergers and acquisitions of domestic companies by foreign investors for national security purposes.

If any M&As involving foreign investors are determined to be a threat to national security, those deals should be terminated, the regulation states.

In addition, any past M&As of domestic companies by foreign investors that are found to have threatened national security will be terminated. As an alternative, the ministry may "take relevant measures such as equity and asset transfers or other methods to eliminate their (M&As) influence on national security," according to the regulation, which will take effect from next Thursday.

According to a circular concerning the review system, which was issued in February by the State Council, China's Cabinet, the review process will involve foreign M&As of domestic military-industrial enterprises and supporting firms, companies near "major and sensitive military facilities" and other M&As that are deemed to be relevant to national security.