The UK’s Foreign Investment Security Review Mechanism: Characteristics, Origins, and Responses

Abstract

The UK’s National Security and Investment Act 2021, which came into effect in January 2022, marks the establishment of a foreign investment security review mechanism unique to the UK. This article examines the Act’s text and identifies several key features of the mechanism, including its broad review scope, ease of activation, flexible standards, and instrumental tendencies. Applying a constructivist framework, this article argues that the establishment of this mechanism is primarily driven by a shift in the UK’s identity, reinforcing its alignment with the United States while positioning China as a “competitor”. The NSI Act’s broad scope and discretionary powers disproportionately impact Chinese investors, given their concentration in high-risk sectors and geopolitical tensions. In response, this article proposes that China can mitigate the potential negative impact of this mechanism on its investors by adopting both conceptual and normative strategies, contributing to the reconstruction of the UK’s perception of China within the broader social context.

1. Introduction

On 4 January 2022, the UK’s National Security and Investment Act 2021 (NSI Act) officially came into effect. This law grants the British government the authority to review investments on the grounds of national security, ushering in a new era of investment management in the UK and fundamentally transforming its previously open foreign investment management system. It represents a fundamental shift from the country’s previous open foreign investment regime. The new regime under the NSI Act is the culmination of several years of discussion on the UK’s approach to national security matters (Daszko 2024). The NSI Act aligns with the global trend of securitizing foreign investment and complies with the WTO’s national security exceptions. Under multilateral rules such as GATT Article XXI and GATS Article XIV, member states are explicitly granted the right to take measures “necessary for the protection of essential security interests”,1 which are exempt from general WTO obligations. These exceptions provide states with broad discretionary power to restrict foreign investments or mergers based on national security imperatives.

The UK has long been favored by Chinese investors and stands as an important economic and trade partner for China in Europe. By the end of 2021, the stock of two-way direct investment between China and the UK had reached USD 47.8 billion, an increase of nearly USD 5 billion from the end of 2019. The two countries have engaged in deeper and more extensive cooperation in areas such as finance, infrastructure, and new energy.2 But the UK’s growing national security concerns over investments from China have become an important reason for formulating the NSI Act (Muchlinski 2023).

Against this backdrop, the changes in the UK’s foreign investment security review mechanism have exerted an impact on Chinese investments in the UK that cannot be ignored. This mechanism not only restricts the investment of Chinese enterprises in the UK but also may change the future direction of China–UK economic and trade cooperation. In the current process where China is vigorously promoting the “Belt and Road” Initiative and accelerating the pace of outbound investment, in-depth research on the UK’s foreign investment security review mechanism has important practical significance for safeguarding the interests of Chinese investors and ensuring the steady development of outbound investment.

This paper will analyze the core provisions and characteristics of the NSI Act, further explore the reasons behind the establishment of the new foreign investment security review mechanism in the UK through the lens of constructivism theory, and propose strategies for addressing the impact of this mechanism. By examination and analysis, this paper concludes that the UK’s foreign investment security review mechanism has such characteristics as being easily triggered in the review process, having a wide scope, setting up multiple dual mechanisms in many aspects, having flexible review standards, and showing obvious tendencies of being used as a tool and politicized. The establishment of this mechanism in the UK stems from the changes in its identity perception. In practice, this mechanism has had a significant impact on Chinese investments in the UK. Chinese enterprises are faced with a more complicated investment regulatory environment, and the encirclement situation of foreign investment security reviews formed by the UK in cooperation with the US, European countries, and others has brought greater challenges to China’s outbound investments.

2. An Overview of the UK’s Foreign Investment Security Review Mechanism

The foreign investment security review mechanism in the United Kingdom has undergone changes in two phases. Prior to the enactment of the NSI Act, the review of public interest issues in investments (including those related to national security) was primarily conducted by relevant departments under the Enterprise Act 2002 (EA2002). However, after the NSI Act came into effect, the review of national security issues in foreign investments is now primarily governed by this new law. Under EA2002, there were relatively few practices of foreign investment security reviews, whereas the foreign investment security review mechanism under the NSI Act will now play a dominant role.

2.1. Foreign Investment Review in the UK Before the NSI Act

Prior to the enactment of the NSI Act, the UK maintained a relatively open foreign investment review mechanism, with a primary focus on competitive behavior in foreign investments, alongside the review of public interest matters. During this period, the main legal basis for foreign investment review in the UK was the EA2002, which aimed to establish an independent competition authority, reform bankruptcy procedures, and address trade practices detrimental to consumers.3 The Competition and Markets Authority (CMA) was primarily responsible for implementing the EA2002. In specific transactions, investors could voluntarily submit investment notifications, or the CMA could intervene in investments under certain conditions. However, in general, the CMA would only investigate competition-related issues in investments.

The EA2002 also provided a legal basis for the security review of foreign investments. It explicitly allowed the UK to review public interest issues in investments.4 According to the UK government’s official Green Paper titled National Security and Infrastructure Investment Review (Green Paper), the public interest here includes national security, public safety, financial stability, and media plurality.5 As of 2017, the UK Secretary of State had intervened in 12 cases based on public interest, 7 of which involved national security, indicating that such practices were not extensive.6 After the enactment of the NSI Act, the portion of public interest review concerning national security was removed from the EA2002. As a result, under normal operations, the CMA will no longer manage investments on the grounds of national security.

2.2. Rules Established by the NSI Act

2.2.1. Conditions for Initiating National Security Reviews

The NSI Act explicitly stipulates that a “trigger event” can initiate a national security review, with qualified investors required to submit a review application.7 It can be said that the trigger event is the core element of the entire mechanism. A trigger event refers to gaining control over a qualifying entity or qualifying asset. Qualifying entities include two types: the first is a UK entity, which refers to any entity other than a natural person, such as a company, limited liability partnership, or trust; the second is an entity registered or established outside the UK, provided that this entity conducts business activities in the UK or supplies goods or services to individuals in the UK. Qualifying assets include land, tangible movable property, or ideas, information, or technology with industrial, commercial, or other economic value. Land or tangible movable property located outside the UK is also considered a qualifying asset if it is related to activities conducted within the UK or to the supply of goods or services to individuals in the UK.

Control, therefore, requires a distinction between control over a qualifying entity and control over a qualifying asset. Regarding a qualifying entity, control refers to acquiring rights or interests in the entity or related to the entity in circumstances explicitly outlined by the NSI Act. Four specific circumstances are outlined: an increase in the proportion of shares held, for example, from 25% or less to more than 25%; an increase in the proportion of voting rights held, for example, from 50% or less to more than 50%; acquiring voting rights in the entity that enables the investor to ensure or prevent the passing of any level of decision related to the management of the entity; and an investment that enables the investor to materially influence the entity’s policies.8 In specific 17 sectors, an investment that meets the first three conditions of control constitutes an acquisition that must be reported, requiring the investor to proactively submit relevant information to the UK government for review. Control over a qualifying asset refers to acquiring rights or interests in the asset or related to the asset under specific circumstances. This primarily includes two scenarios: the ability to use the asset after the investment or the ability to use the asset to a greater extent after the investment; or the ability to direct or control the use of the asset after the investment or the ability to direct or control the use of the asset to a greater extent after the investment.9

The broad definition of “triggering events” allows any investment involving sensitive sectors to be subjected to scrutiny, signaling a paradigm shift in the UK’s foreign investment review regime from “limited regulation” to “preventive intervention.” This trend closely aligns with the approach of the U.S. Foreign Investment Risk Review Modernization Act (FIRRMA), which has expanded its review scope from traditional controlling acquisitions to non-controlling investments. To some extent, this approach strengthens the UK’s regulatory control in the realm of national security.

2.2.2. Proactive Intervention in National Security Reviews: Call-In Power

Under the NSI Act, when a trigger event occurs, the Secretary of State may issue a call-in notice to initiate a review.10 This is a measure that allows the UK government to proactively investigate transactions. The government has further clarified through guidance that a call-in notice will only be issued for investments that may pose a risk to national security. Specifically, this includes investments that threaten government or defense assets, investments with potential security implications for critical infrastructure in the UK, and investments aimed at preventing hostile actors from establishing defense or technological capabilities that could pose a national security threat to the UK. This mechanism ensures that the government can intervene in transactions that may not meet the mandatory notification threshold but still raise significant national security concerns.11 The call-in notice may be issued to the investor, the qualifying entity, or any other person deemed appropriate by the Secretary of State. In deciding whether to issue a call-in notice, several specific risk factors are considered: First, target risk, which primarily assesses whether the target of the investment could pose a threat to national security. Second, investor risk, which examines whether the investor’s control over the target might lead to national security risks. Third, control risk, which evaluates the potential national security risks arising from the degree of control exerted over the target.12

Once a call-in notice is issued, the UK government is required to review the transaction within a specified assessment period. The assessment period consists of three stages: the initial period, the additional period, and the voluntary period. The initial period lasts for 30 working days from the day the call-in notice is delivered to the investor. The additional period follows the initial period and extends for an additional 45 working days. The voluntary period is an extended timeframe that may be added after the additional period, but only with the written agreement of both the Secretary of State and the investor.

Generally, the review process concludes at the end of the initial period. However, if the Secretary of State reasonably suspects that the transaction poses a national security risk, the review may proceed into an additional period. If the Secretary of State has a reasonable suspicion of national security risks and determines that further time is necessary to make a decision, the voluntary period may be triggered under certain conditions.

2.2.3. Notification Procedure for National Security Reviews

National security reviews are chaired by the Secretary of State, initially managed by the Investment Security Unit within the UK Department for Business, Energy and Industrial Strategy (BEIS). Following a restructuring of government agencies, BEIS was split, and the Investment Security Unit was transferred to the Cabinet Office, where it continues to handle national security reviews. The NSI Act establishes two types of review procedures: the mandatory notification procedure and the voluntary notification procedure. The mandatory notification procedure primarily applies to acquisitions that must be reported.13 In such cases, investors are required to proactively submit a notification to the Secretary of State, who must decide whether to approve the investment within a reasonable and feasible timeframe. Acquisitions that require notification involve 17 sectors, including advanced materials, civil nuclear energy, defense, and artificial intelligence. The review period is 30 working days. If the notification is rejected, the Secretary of State must provide a written response outlining the refusal. If the notification is approved, the Secretary of State should, where practically possible, notify the relevant parties promptly.

The voluntary notification procedure applies to trigger events that do not constitute mandatory acquisitions.14 In such cases, investors or qualifying entities can voluntarily decide whether to submit a notification to the Secretary of State, notifying of a trigger event that has occurred or is about to occur. If the transaction is rejected, the Secretary of State must provide written reasons for the decision. If the transaction is approved, the Secretary of State should notify the relevant parties as soon as reasonably practicable. The review period for voluntary notifications is also 30 working days. During the review process, the Secretary of State may request additional information from the investor or require the investor to submit evidence at a designated location.

The dual-track system of mandatory and voluntary notifications bears a striking resemblance to the U.S. foreign investment security review regime,15 reflecting synergistic innovation between the U.S. and the UK in balancing national security safeguards and investment facilitation. Through mandatory notifications, both countries implement preemptive control over core sectors (e.g., the UK’s 17 sensitive sectors and the U.S.’s “critical technologies” list), ensuring transparency in the flow of strategic assets and technologies. Meanwhile, voluntary notifications provide flexible pathways for non-sensitive or low-risk transactions, reducing corporate compliance costs. This framework of “targeted control + flexible supplementation” avoids stifling market vitality through overregulation while enhancing review efficiency via categorized management.

2.2.4. Remedies

If the Secretary of State determines that there is a necessity to protect national security during the review, several remedial measures may be implemented, including:

Interim Orders: These orders may be issued during the assessment period following the call-in notice, where necessary and appropriate. An interim order may require the parties involved to take or refrain from specific actions, appoint an individual to oversee related activities, or ensure the confidentiality of information.

Final Orders and Final Notices: Before the conclusion of the assessment period under the call-in notice, the Secretary of State must issue a final order or provide a final notice to the parties involved. Similarly to interim orders, final orders may require the parties to take or refrain from specific actions, appoint an individual to supervise related activities, or ensure the confidentiality of information.

In general, the NSI Act demonstrates procedural transparency through its codified review framework, aligning with the WTO’s mandate for regulatory clarity under Article X of GATT1994.16 The UK government has adopted multiple measures to enhance predictability, such as defining 17 sensitive sectors on its official website17 and has clarified procedural timelines in the legislation. These measures reduce the risk of arbitrary enforcement to a certain extent. The Government has basically succeeded in its aim of providing certainty to businesses in relation to the Act (Mann 2024).

3. Key Features of the UK’s Foreign Investment Security Review Mechanism

The NSI Act established an independent foreign investment security review mechanism for the UK, strengthening the government’s powers in this area and providing clear guidelines for foreign investment security reviews. This has, to some extent, enhanced the certainty of such reviews. However, the mechanism primarily focuses on procedural norms and lacks sufficient substance in terms of the content of the review, which could make it susceptible to “behind-the-scenes manipulation.” The specific features of the mechanism are as follows:

3.1. The Review Process is Easily Triggered

The foreign investment security review mechanism established by the UK does not provide a clear definition or explanation of the concept and composition of national security. Instead, the initiation of a national security review is based on whether a trigger event has occurred. This marks a shift from a model based on the combination of “investment + national security concept” to one that focuses on the “investment behavior”. In essence, a trigger event refers to the assessment of whether a specific action has occurred or to the degree of change, such as an increase in the ownership of eligible entity shares from below 50% to above 50%. The NSI Act no longer focuses on the investment-national security concept, but instead targets specific investment behaviors in practice, making the enforcement process simpler and more precise. However, this also lowers the threshold for triggering a review, as evidenced by its multi-criteria approach, which increases the likelihood of a review being initiated. The NSI Act specifies control changes in terms of voting rights or shareholding ownership rising from below 50% or 75%, as well as changes in the degree of control over assets. This means that control is not a simple “yes or no” judgment, but rather requires evaluating multiple criteria based on the extent of the investment changes. Furthermore, investments that have been reviewed may be subject to further scrutiny in the future.

3.2. Broad Scope of Review

The scope of review set by the NSI Act is exceptionally broad, manifesting in several aspects. First, there are no restrictions based on economic sectors, meaning that investments in any economic sector could potentially trigger a national security review, provided that control over qualifying entities or assets is involved. In such cases, qualifying investors may voluntarily submit notifications. Second, the sectors subject to mandatory notifications are extensive, of significant importance, and largely represent rapidly growing industries in the UK. A total of 17 economic sectors are subject to mandatory notifications, including: advanced materials, advanced robotics, artificial intelligence, civil nuclear, communications, computing hardware, critical suppliers to government, cryptographic authentication, data infrastructure, defense, energy, military and dual-use, quantum technologies, satellite and space technologies, suppliers to the emergency services, synthetic biology, transport.

For instance, the UK holds a leading position in civil nuclear energy, while sectors such as advanced materials, synthetic biology, and artificial intelligence are linked to dual-use technologies. Additionally, sectors like communications and energy, as foundational industries, influence multiple fields, and data infrastructure and computer hardware are pivotal to the development of the digital economy. These sectors are closely tied to national security and are highly attractive to foreign investments.18 In practice, all 17 economic sectors have seen actual mandatory notification submissions.19 Furthermore, the review covers not only entities and assets within the UK, but also those located abroad. Overseas entities (if they provide goods or services to UK citizens or conduct business in the UK) and assets (if they are related to activities within the UK or to the provision of goods or services to UK citizens) may also be subject to review.

3.3. Dual Mechanisms Are Established in Multiple Areas

The NSI Act establishes a dual-structured national security review mechanism in the UK, with these mechanisms operating simultaneously and coordinating with each other to address national security concerns in foreign investments in a comprehensive manner. From the perspective of the overall framework design, the public interest review established under EA2002 works in tandem with the national security review under the NSI Act. Prior to the passage of the NSI Act, national security concerns in foreign investments were addressed through the public interest review embedded in EA2002, meaning that national security issues were examined alongside competition-related matters. After the passage of the NSI Act, the national security review content within the public interest review of EA2002 was separated and specifically outlined in the NSI Act. However, the government still retains the authority to review public interest concerns, such as public health, media plurality, and financial system issues, under EA2002. This arrangement was designed to ensure that both reviews operate in parallel, each addressing distinct issues within foreign investment. However, the UK government has not provided a clear definition of national security, which may result in overlaps between national security issues and public interest concerns. Given the evolving trends in the conceptualization of national security, it is increasingly likely that national security may be interpreted to encompass financial stability, public health, and other areas, thereby broadening the potential for interaction between public interest and national security. As a result, in practice, public interest reviews and national security reviews may overlap and address the same issues in a coordinated manner.

Due to the overall framework design mentioned above, the dual-layer nature is also reflected in the setup of the competent authorities. Investments assessed by the Cabinet Office may also be subject to review by the CMA. The CMA is committed to promoting competition in the UK market, benefiting both domestic and foreign consumers, ensuring that markets work efficiently for consumers, businesses, and the economy. While the NSI Act changes the handling of national security-related public interest matters, public interest interventions related to media plurality, financial stability, and public health emergencies are still regulated under EA2002. This means that the foreign investment management function of the Cabinet Office may overlap with the CMA’s role in intervening on public interest grounds.

In terms of review procedures, two pathways—active and passive—are defined, with two distinct channels under the passive pathway. Chapter 1 of the NSI Act introduces a new power known as the “call-in power”. When a trigger event occurs, the UK Secretary of State may use this power to issue a call-in notice to investors, qualifying entities, or other persons deemed appropriate by the Secretary of State, thus intervening in the transaction. This is an active review mechanism employed by the UK government. At the same time, when a trigger event occurs, the Cabinet Office can initiate a review by accepting a submission from the investor or other relevant parties, which is a passive initiation of the review process. These two mechanisms work in tandem to ensure that the UK government can scrutinize transactions with potential national security implications to the greatest extent possible, thereby avoiding oversights. The call-in power reflects an active screening process that targets national security risks reasonably suspected by the government, while the notification system encourages market participants to actively alert the government about potential national security risks. Furthermore, the passive pathway is divided into voluntary and mandatory notification procedures. When a mandatory notification acquisition occurs, the investor is required to submit a review application to the Secretary of State. For other trigger events that do not involve mandatory notifications, it is up to the involved parties to decide whether to submit a notification. This structure ensures that national security concerns in critical areas receive continuous attention while minimizing undue interference with the broader market, thereby maximizing national security protection.

3.4. Flexible Review Criteria

The review criteria determine whether a transaction will ultimately pass national security review, serving as the core content and basis for national security assessments. However, the UK government intends to maintain flexibility in this regard,20 which allows for easy identification of whether a transaction should undergo review, but makes it difficult to accurately determine whether it will ultimately be approved. While the new mechanism established by the UK government explicitly aims to safeguard national security, it does not define the concept of national security or the review criteria within the NSI Act, nor does it specify the risks that may threaten national security. The UK government believes that this approach provides the necessary flexibility to ensure national security. This means that, although the national security review mechanism in the UK is procedurally clear, the substantive issues remain in a “black box”. The review is carried out on a case-by-case basis, with “specific issues analyzed specifically”, considering all relevant factors as deemed by the government.21 Moreover, the UK government does not disclose related information, with the possibility of only publishing call-in notices or final notifications and orders after the assessment period has concluded. Even when information is disclosed, it is contingent upon meeting specific preconditions for publication.22 In fact, from the final orders currently made public, it is evident that the useful information disclosed is extremely limited, meaning it is difficult for external parties to understand the factors considered by the UK government in its review process.

The opaque review criteria under the NSI Act may fail to meet the applicability requirements of Article XXI of the GATT 1994, raising concerns about the UK’s potential misuse of national security exceptions to evade its WTO obligations. In the landmark WTO case, Russia–Measures Concerning Traffic in Transit, the Panel emphasized that member states cannot arbitrarily elevate any concern to the level of an essential security interest.23 Rather, such measures must comply with the principle of good faith under Article 26 of the Vienna Convention on the Law of Treaties (VCLT), which prohibits states from exploiting exceptions under Article XXI to circumvent their GATT obligations.

However, the UK government has provided an explanation of the factors it generally considers when exercising its call-in powers, specifically those that may impact national security. Since these factors represent the elements that the UK government reasonably suspects could pose a national security risk, they will, at the very least, indirectly influence the government’s assessment in the substantive phase regarding whether a national security risk has materialized, as well as the severity of such a risk. These factors include risks associated with the target, the investor, and control; however, even in this context, the government’s interpretation of these factors remains somewhat ambiguous.

3.5. Clear Tendencies Toward Instrumentalization and Politicization

Although the NSI Act provides a specific and clear operational framework for the UK’s national security review mechanism, the lack of evaluation standards and criteria makes it highly susceptible to becoming an arbitrary and opaque tool for hidden operations. In particular, the established call-in power system indicates that the UK government has the potential to wield significant authority at any time. This highlights that the current foreign investment national security review mechanism in the UK focuses more on formal and procedural regulation, rather than seeking to achieve comprehensive institutionalization in substantive content. The UK government has also stated that the establishment of this mechanism is solely for the protection of national security and is unrelated to economic objectives.24 However, if the concept of national security is not properly defined, it carries the potential for broad politicization. The ambiguity of the “national security” concept under the NSI Act, coupled with the judiciary’s inclination to grant the executive branch broad discretionary authority over national security matters, allows non-defense-related issues to be subsumed within the scope of national security. As a consequence, “national security” risks are being reduced to an elastic tool devoid of fixed definitional boundaries (Holbrook 2024). Originally, the foreign investment security review mechanism was intended to address political issues using legal reasoning, a practice commonly seen in investment law. Yet, a system designed to be “shiny but hollow” transforms into a legal “packaging” of political issues, ultimately representing only a limited form of legalization (Wang 2016).

The views on national security issues related to investment in the UK, published by the National Protective Security Authority (NPSA), also reflect this tendency. The NPSA refers to investors who pose a threat to UK enterprises and national security as “hostile actors”. Hostile actors may gain access to critical non-public information of businesses, potentially damaging the UK’s reputation. Furthermore, these hostile actors may be supported by foreign governments and engage in activities such as enhancing research and development capabilities to undermine the UK’s military and technological advantages, and utilizing key UK facilities to serve their own national interests. Clearly, foreign investment is viewed by the NPSA as a potential threat. Moreover, the NPSA also believes that even non-state-owned foreign enterprises could negatively impact or control UK businesses, using China and Russia as examples.25 Although the UK has stated that whether an investment qualifies as a qualifying investment requiring mandatory notification depends on the facts of the investment and whether it meets the relevant criteria under the NSI Act, rather than the characteristics or nationality of the investor,26 in the context of undisclosed review criteria, the identity and nationality of the investor have inevitably become hidden standards.

The tendency toward instrumentalization and politicization of the mechanism is also reflected in the adjustability of its actual review process. Many transactions that undergo in-depth national security assessments, including those blocked or conditionally approved in the final orders, do not fall within the mandatory notification scope defined by the mechanism, such as transactions involving semiconductors, intellectual property, and licenses. This allows the UK government to tailor its review focus to different countries, setting differentiated priority areas. Additionally, with regard to the conditions attached to approved transactions, the UK has neither provided clear prior guidance nor offered post-review summaries. The publicly available attached conditions are diverse, ranging from structural requirements to behavioral remedies.27 This indicates that the additional conditions are subject to change in response to shifts in UK policy.

3.6. Country-Specific Targeting in Legal Texts: A Cross-National Comparison

Modern foreign investment security review regimes universally claim “neutrality” in their legal texts, yet their specific designs reveal explicit or implicit targeting of particular countries across jurisdictions. Taking the United States as an example, the FIRRMA delineates key focus areas through clearly defined concepts such as “critical technologies” and “critical infrastructure,” mandating mandatory notifications for foreign investments involving these sectors. Simultaneously, FIRRMA introduces the notion of “countries of special concern,” requiring heightened scrutiny of investments originating from states with a demonstrated or declared strategic goal of acquiring critical technologies or infrastructure that could undermine U.S. leadership in national security-related domains.28 Through a sense of Congress provision in FIRRMA, CFIUS reviews potentially can discriminate among investors from certain countries that are determined to be a country of special concern (specified through additional regulations) that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect U.S. leadership in areas related to national security.29

China’s 2020 Measures for the Security Review of Foreign Investment do not explicitly target any country in their statutory text.30 However, its review scope is operationalized through industry-specific controls under the Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition), which prohibits foreign participation in rare earth and radioactive mineral exploration, restricts foreign access to satellite navigation and quantum communication sectors, and mandates security assessments for cross-border data transfers.31 While the review criteria purportedly disregard investor nationality, the disproportionately high number of blocked U.S. semiconductor investments in China reflects the latent political effects of this industry-centric approach.

The UK’s regime entirely avoids country-specific references in its legal text, defining risks through 17 mandatory sectors such as artificial intelligence and quantum technologies. Nevertheless, parliamentary debates on the Act reveal that China was mentioned far more frequently than other countries, and the Global Britain report formally designated China as a “systemic competitor”.32 This tension between textual neutrality and political practice renders the NSI Act a paradox of “legal universalism” and “executive exceptionalism”—its design eschews explicit targeting provisions but constructs China as a “default risk source” through operational practices.

The above comparison demonstrates a spectrum of country-specific targeting across regimes: the U.S. employs explicit lists to directly pressure China, China adopts sectoral controls for specialized governance, while the UK opts for a structural flexibility strategy—maintaining textual neutrality in law while achieving discriminatory enforcement through non-textual channels.

4. The Rationale Behind the Establishment of the UK’s Foreign Investment Security Review Mechanism

The question of why the UK has chosen this moment to establish a foreign investment security review mechanism, imbued with the aforementioned characteristics, is indeed a matter worthy of deep contemplation. From textual analysis and feature examination, it is evident that this mechanism is marked by a high degree of arbitrariness. Its purpose appears not solely to institutionalize the safeguarding of national interests but seems to point towards other underlying intentions. To unravel the UK’s underlying motives, it is necessary to employ theoretical frameworks to explore the intentions behind this move.

Constructivism, a major school of thought in international relations theory, integrates social theory into state relations, emphasizing the unique significance of non-material factors such as ideas and culture in international relations. Although the foreign investment security review mechanism and the legal framework upon which it is based pertain to domestic law, the social relations it regulates are influenced by international factors. These involve foreign investors, investment interests, and foreign governments’ involvement in external investment. The mechanism serves as an important link between domestic and international relations and is a part of what might be considered foreign relations law. This concept is similar to China’s approach to foreign-related legal governance (He 2021), thus, constructivism provides a useful lens through which to explain the changes in the UK’s policies in this area.

4.1. Fundamental Principles of Constructivism

Constructivism defines international relations through idealism. Idealists believe the most fundamental fact about society is the nature and structure of social consciousness (Wendt 2003). In international interactions, the essence of the international community consists of shared ideas, which are intersubjective and can manifest in forms such as norms, rules, institutions, and culture. International law is a typical example of this. Of course, idealism does not seek to completely deny the role of material power, but rather asserts that the exercise of material power is inseparable from the meaning attributed to it by ideas. Specifically, in explaining state behavior, constructivism adheres to two key principles: first, the structure of human relations is primarily determined by shared ideas, not by material forces; and second, the identity and interests of purposive actors are constructed by these shared ideas, rather than being inherently intrinsic (Qin 2006b).

Constructivism posits that ideas are the fundamental source of society, shaping human relationships. Ideas, as understood in the human mind, encompass worldviews, principled beliefs, and causal beliefs, among other elements (Xu 2020). The meaning of power and the content of interests are largely determined by ideas. The social significance of objective facts is limited. Even absolute material existence can only acquire meaning through the practical activities and representational systems of social agents (Qin 2006a). As an example, the United States may not be concerned about the increase in Canada’s military power, but it would be deeply troubled by changes in North Korea’s economic strength (Guo 2001).

Similarly, no one denies that the motivation for state behavior is the recognition of national interests. The question, however, lies in how to interpret interests and their role. Mainstream international relations theories employ rational choice theory to explain the role of interests, with its core proposition being that willingness plus belief equals action. Willingness is the reason for desiring something, while belief is knowledge about that thing. Willingness represents motivation and interest, while belief represents ideas. Constructivism takes this a step further by exploring how willingness, or interest, is constructed, positing that willingness has a cognitive basis. In other words, ideas construct interests. Our desire for a particular object or outcome is based on our understanding of what it is and how it benefits us, which then leads to action. While human biological instincts guide basic desires, in socialized settings, human motivations for action stem more from individuals’ understanding of the value of objects.

Building on this foundation, Alexander Wendt complements the process of constructing interests through ideas in a social context by introducing the concept of identity. Identity is the factor that makes something what it is; it is an attribute of purposive actors that generates motivations and behavioral traits. Ideas and knowledge serve as explanatory variables for state behavior, and a state’s interests and identity are constructed or shaped by ideas and knowledge (Xu 2020). A state that sees itself as the guardian of world order may act in ways that transcend sovereignty and pursue hegemonic actions, whereas one that views itself as a member of the international community is motivated to uphold international rules. Identity is the combination of self and other, representing an actor’s self-awareness and how other actors perceive that actor. Recognition of identity involves understanding the objective need to maintain one’s existence and holding beliefs about how to achieve this identity. It is these beliefs about how to practice identity that guide an actor’s allocation of behavior (Sun 2008).

4.2. Identity Transformation—The Rationale Behind the Establishment of the Foreign Investment Security Review Mechanism

The UK is currently undergoing a transformation in its identity, seeking and recreating its new position through interactions with the global system, traditional partners (primarily the EU and the US), and China. This shift is also reflected in the evolving understanding of its national interests, which in the realm of foreign investment management manifests as a transition from openness and inclusivity to a security-first mindset. Specifically, the reasons for the UK’s establishment of a foreign investment security review mechanism are as follows:

First, redefining collective identity. Collective identity takes the relationship between self and other to its logical conclusion, identification (Wendt 2003). It reflects a nation’s position within a global structure. At present, the UK is attempting to redefine its position in the world system and to achieve unity in its self-perception and recognition by others. This shift determines that its security interests will be framed at a global level (Wang 2018).

Since the colonial era, the UK has occupied a leading position in the world system and once achieved global hegemonic status, famously known as the “Empire on which the sun never sets”. By 1945, the UK still saw itself as a global power, and this recognition was broadly shared by other nations (Coxall et al. 2003). However, the Suez Crisis in 1956 marked the peak of the global anti-colonial movement, and the British Empire began to gradually disintegrate. Since then, the UK has remained highly sensitive about its global position. Currently, the UK is at a new stage of geopolitical transformation. Whether under Conservative or Labour governance, one of the key objectives of its foreign policy is to restore its status as a global power (Sun and Zhang 2022).

At this juncture, the UK has set its sights on the global stage, launching the “Global Britain” strategy to reaffirm its collective identity. On 16 March 2021, the UK released the report Global Britain in a Competitive Age: The Integrated Review of Security, Defence, Development and Foreign Policy (Global Britain report), which provides a comprehensive description of this strategy. The report elevates national security to a highly significant level, viewing sovereignty, security, and prosperity as key national interests. It outlines the intention to maintain competitiveness across several domains, including scientific and technological development, the construction of a “rules-based international order”, and both domestic and international security and defense efforts.33 The goal envisioned in the Global Britain report is to enhance the UK’s international status and global influence, positioning the UK as a key rulemaker, a shaper of international order, and a defender of Western values.34 As an important link between domestic and international economic security and a crucial aspect of managing relationships with global foreign investment, the UK’s foreign investment security review mechanism has emerged as a natural development, designed to establish the UK’s position within the global foreign investment management landscape.

Second, adjusting its role identity with partners. Role identity possesses structural attributes; it is a position occupied within the social structure and is acquired through interactions with individuals of reciprocal identities in accordance with behavioral norms. In its engagements with partners, the United Kingdom has begun selectively establishing varying degrees of role identities with its counterparts, aiming to deepen its special relationship with the United States and appropriately adjust its distance from the European Union. This strategy underscores the UK’s flexibility in international relations and its consideration of its own interests. Over the more than 40 years since the UK joined the EU, it has experienced two parallel and contradictory processes: the Europeanization of its national identity and the rise in Euroscepticism (Wang and Xia 2019). Following the Brexit referendum in 2016 and the UK’s formal departure from the EU in 2020, the UK has sought to engage with the EU from a more independent stance. Prior to Brexit, the UK already occupied a peripheral position within the EU, becoming what might be described as an “awkward partner” within the union. This helps explain its desire for independence in its behavior. For example, the UK’s Green Paper stated that, because the EU was unlikely to establish an effective foreign investment review system in the foreseeable future, the UK decided to create its own independent foreign investment security review mechanism.35 However, it cannot be denied that both the UK and the EU have a desire to achieve greater strategic autonomy through institutional building.

In contrast, the role identity construction between the UK and the United States is shaped by a complex web of historical, institutional, and cultural factors (Coxall et al. 2003). After the two world wars, the UK and the US developed a “special relationship”, with the UK leveraging American hegemony to bolster its own global standing. Beginning in the first half of the 20th century, the UK gradually acknowledged the reality of the shift in global power from British to American hegemony and the limitations of its own strength. The UK accepted the international order led by the US and became a staunch supporter of US foreign policy after World War II (Wang 2020). In September 2021, the UK, the US, and Australia formed the AUKUS alliance to deepen trilateral friendship, uphold values of “freedom and democracy”, and strengthen security and defense cooperation.36 In December 2021, the UK also actively participated in the US-led “Summit for Democracy”, where then-Prime Minister Boris Johnson explicitly stated the commitment to upholding freedom and open values with its allies. This close role recognition often leads the UK to emulate what it perceives as successful systems, and the foreign investment security review mechanism established by the US has had a significant influence, becoming a model for the UK. The first annual report on the UK’s security review mechanism highlighted that closer cooperation with allies would enable the UK to better address the security risks posed by investments, and that in certain areas of mechanism design, the UK could learn from the US.

Third, constructing a new role identity with China. Since the turn of the century, the UK’s policy toward China has evolved through three distinct phases: the “Golden Era” of Sino–British relations, the post-Brexit referendum development window, and the shift in China policy under the Johnson government (Wang 2020). Since the onset of the “Golden Era” in Sino–British relations, bilateral economic and trade relations have developed steadily, with few frictions or disputes, and UK–China economic exchanges have primarily been focused on pragmatic cooperation (Ma 2021). However, under the Johnson government, the UK’s policy toward China reversed. For example, the UK made repeated attempts to intervene in the South China Sea issue. In 2019, the UK, along with France and Germany, issued a joint statement regarding the South China Sea, asserting concerns about potential insecurity and instability in the region.37

In economic and trade exchanges with China, the UK also altered its previous approach. For instance, in the 5G issue, the UK imposed unwarranted pressure on Huawei, demanding that operators remove Huawei equipment from the UK’s 5G network by 2027.38 The issue of the Hinkley Point nuclear power plant has been subject to repeated shifts, with the Green Paper explicitly stating that the investment concerns surrounding Hinkley Point were one of the key reasons for establishing the foreign investment security review mechanism.39 Additionally, the UK adhered to the US’s notion of a “rules-based international order” in its China policy, attempting to solidify its position within the current international economic structure. This also reflects the UK’s attempt to reshape its role identity with China, shifting from a cooperative partner to a competitor. Not all countries may accept China’s path of “modernization for national rejuvenation”, as China’s modernization has been perceived as a “deviation from the norm” (Jin 2023). In addition, the gradual rise in China as an economic, regulatory, and lending powerhouse will also lead to more protectionist measures being taken by regions in the world that traditionally advocate economic liberalization (Gáspár-Szilágyi 2023). In this context, the establishment of a new foreign investment security review mechanism is seen as a critical tool for controlling Chinese investment in the UK.

Additionally, clues can also be seen through the NSI Act legislative debates. The UK parliamentary debates on the NSI Act explicitly identify China as a primary concern in national security reviews. During the debates, Members of Parliament repeatedly emphasized that China is a systemic competitor whose investments could harm UK national security through technology transfers or supply chain dominance, labeling China as a “significant threat” to British security.40 This debate material reveals the strategic vigilance and institutional safeguards against China embedded in the NSI Act’s legislative process. The core logic lies in leveraging legal instruments to restrict China’s influence in key technology sectors, reflecting a deliberate alignment with broader geopolitical efforts to counterbalance China’s technological ascendancy.

5. The Impact and Countermeasures of the UK’s Foreign Investment Security Review Mechanism

5.1. Overall Status of the Mechanism’s Implementation

The operation of the UK’s foreign investment security review mechanism has shifted the country’s previously lenient stance toward foreign investment. This move is in line with the broader trend of strengthening foreign investment reviews seen across the US, the EU, and other regions, and it aligns with the UK’s evolving identity perceptions in relation to its partners. In June 2022, BEIS published the first annual report, summarizing the operation of the mechanism from January 2022 to 31 March 2022. During this period, BEIS received 222 notifications, including 196 mandatory submissions and 25 voluntary submissions. The UK Secretary of State exercised the intervention power 17 times.41 Subsequently, in July 2023, the Cabinet Office released the second annual report, summarizing the mechanism’s operation from 1 April 2022 to 31 March 2023. During this period, a total of 866 notifications were received, of which 671 were mandatory submissions and 180 were voluntary submissions. The UK Secretary of State exercised the intervention power 55 times.42

As of 1 March 2024, the UK has issued final orders for national security reviews on 20 transactions. Among them, 5 transactions were prohibited or required to be reversed to their previous state, while 15 transactions were approved with conditions. These transactions span across critical and sensitive areas, including energy, dual-use technologies, and defense.43 The frequency of final orders exceeded the initial expectations in the impact assessment of the NSI Act.44 The Financial Times also noted that the number of interventions by the UK government that year was half the number of investment mitigations in the US, despite the fact that the UK’s economy is only about one-seventh the size of the US economy.45

5.2. Impact on China

The UK’ s foreign investment security review mechanism has had a notable impact on China, both in terms of its design and operational effectiveness, which have posed certain challenges to Chinese investments in the UK. As analyzed earlier, identity has guided the design of this mechanism, influenced its operation, and, in particular, the country of origin has become an implicit factor in the UK’s foreign investment national security review, which is currently directed at China.

5.2.1. China/Chinese Capital as a Key Consideration in the Operation of the Mechanism

From the current practices of the UK’s foreign investment security review mechanism, it is evident that the mechanism pays special attention to Chinese investors. Among the six final orders issued by the UK government that prohibited transactions, five involved Chinese investors: the case of Hong Kong-based Super Orange Holdings Limited investing in Pulsic Limited, Nexperia BV investing in Newport Wafer Fab, and SiLight (Shanghai) Semiconductors Limited. Investing in HiLight Research Limited, Beijing Infinite Vision Technology Co., Ltd., investing in the University of Manchester’s visual sensor technology, and the acquisition of 80.2% of shares in Future Technology Devices International Limited by FTDI Holding Limited.46 This demonstrates that, within a limited number of final orders, China has appeared with a high frequency, accounting for nearly half (9 out of 20 final orders). The UK government’s second report also noted that 42% of the cases in which intervention was exercised involved China.47 This further shows that the mechanism operates according to the logic of identity recognition, and given the “black box” nature of the specific review standards, it can be inferred that the mechanism regards China and Chinese enterprises as a key consideration.

Moreover, empirical evidence reveals a stark mismatch between the scrutiny intensity under the NSI Act and the actual scale of Chinese investments in the UK. According to the UK Department for Business and Trade, the US remained the largest source of FDI to the UK from 2021 to 2023, with annual investment projects exceeding 390, while China averaged merely 39 projects annually, ranking outside the top 10.48 In monetary terms, US investments reached GBP 26.535 billion in 2022, whereas Chinese investments saw a net withdrawal of GBP 63 million.49 Despite the US’s dominant presence in sensitive sectors such as energy, transport, and ICT, US investors faced significantly lower scrutiny rates. The NSI Annual Report (2023–2024) shows that 41% of call-in notices and 48% of final orders targeted Chinese acquisitions, compared to 22% and 21% for US investors.50 If investment scale or sectoral risks were the primary determinants, Chinese investments should logically face lower scrutiny. This paradox of “smaller scale, stricter scrutiny” underscores the geopolitical bias embedded in the Act’s enforcement.

5.2.2. Chinese/Chinese Enterprises Face a More Complex Investment Regulatory Environment

The UK is one of the top three destinations for China’s investment in Europe. According to a report by the Rongding Group, the UK was the largest destination for Chinese investment in Europe in 2022.51 However, the UK’s foreign investment security review mechanism will undoubtedly lead to changes in future investment trends in the UK.

Firstly, from the design of the mechanism, it narrows the scope of sectors where China can invest in the UK. This mechanism focuses on 17 economic sectors, including advanced technology and civilian nuclear energy, which are key areas of China’s foreign investment. In 2021, Chinese outbound direct investment was predominantly concentrated in sectors such as manufacturing, electricity/heat/gas and water supply, information transmission/software and information technology services, and scientific research and technical services.52 China’s investment in the UK has gradually extended from traditional industries such as finance and energy to high-end manufacturing, infrastructure, and information technology sectors.53 Clearly, the key sectors targeted by the mechanism overlap significantly with the fields of China’s foreign investment, meaning that Chinese enterprises’ investments in the UK are likely to be closely scrutinized.

Secondly, the UK foreign investment security review mechanism reflects an effort to curb the development of China’s technology sector and emerging industries. Taking the semiconductor industry as an example, in recent years, China has heavily invested in the semiconductor sector to overcome the “bottleneck” issue, which aligns with the development goals outlined in the “Made in China 2025” initiative. In 2021, the National People’s Congress and the Chinese People’s Political Consultative Conference released the “14th Five-Year Plan for National Economic and Social Development and the Vision 2035”, which also called for a forward-looking strategy in artificial intelligence, quantum computing, and integrated circuits. However, containing China’s semiconductor industry has become a key strategy for the “Five Eyes” countries. As mentioned earlier, three of the transactions prohibited involved Chinese companies’ investments in the UK semiconductor industry. In fact, the semiconductor industry was not specifically included by the UK government in the mandatory notification sectors, suggesting that the UK is closely following the practices of the United States to control China’s investments in this area.

Finally, the conditions attached to approved transactions are complex. As remedial measures allowing investments to proceed, the attached conditions played a significant role in the first year of the mechanism’s operation. These additional conditions have the following characteristics: First, they are varied in form, and there are no clear categories or standards for them. Conditions encountered include information control, revisions to internal management, implementation of security measures, and fulfillment of preventive obligations. These obligations are sometimes not limited to the target company. Second, the impact of attached conditions is difficult to predict. These obligations do not have clear amounts or timeframes that can serve as benchmarks, and the implications of requirements such as preventing access to information related to the target company’s operations are not easily defined. Third, the parties involved in the transaction cannot further negotiate the attached conditions with the Secretary of State. Even if a transaction is approved with conditions, it diminishes the effectiveness of the investment.

5.2.3. Formation of a Foreign Investment Security Review Encirclement with the United States, EU, and Others

In recent years, to further strengthen control over foreign investments, following the United States’ revision of its foreign investment security review mechanism, the European Union, Germany, Canada, and other countries have also introduced new foreign investment review regulations, creating a global trend of establishing such mechanisms. As a core member of both the “Anglo-Saxon bloc” and the “Five Eyes Alliance”, the UK naturally aligns with other members to jointly reinforce foreign investment management. This has led to the establishment of a foreign investment security review coordination model based on the US and Europe. When China’s investments face restrictions from one of these parties, it may encounter a joint encirclement by other countries. This could result in a multilateral foreign investment security review mechanism that ultimately blocks China’s path to acquiring technological growth through investments.

5.3. Responses from the Chinese Government and Enterprises

The implementation of the UK’s foreign investment security review mechanism has already become a settled fact, and it is unrealistic to expect its cessation due to external intervention. However, since identity can be reconstructed in social processes, it is possible to alter the UK’s perceptions and assist in adjusting its identity, which would, in turn, influence how it applies the mechanism. Specifically, China can engage with the UK on both ideological and normative levels, providing a model for “emulation” and influencing the UK’s identity recognition through ongoing social interactions.

5.3.1. Ideological Aspects

Ideology guides action, and direction determines the outcome. China has developed a path in global governance, international relations, and domestic development that can serve as a reference. In terms of global governance, China advocates for building a community with a shared future for mankind, emphasizing dialogue and consultation, mutual construction and sharing, cooperation and mutual benefit, exchange and mutual learning, and a green and low-carbon approach. The goal is to build a world of lasting peace, universal security, common prosperity, openness, inclusiveness, and environmental beauty. In the development of international relations, China has introduced the concept of a new type of international relationship, actively building global partnerships, promoting coordination and cooperation among major powers, improving relations with neighboring countries through goodwill, and strengthening ties with developing nations through a correct understanding of interests and rights. Domestically, China continues to uphold an open approach, adhering to consultation, contribution, and shared development, and promoting the high-quality development of the “Belt and Road” initiative. In contrast, the UK has recently introduced its “Global Britain” strategy, which represents a new phase in adjusting its domestic and foreign policies. This strategy defines the UK as a major power with “global influence” and as a global leader of values such as democracy and openness. In terms of multilateral and bilateral relations, the strategy can be seen as a new version of “three-ring diplomacy”, which emphasizes strengthening ties with the United States while defining its relationship with China based on ideology and values.

It can be seen that, ideologically, the two countries both overlap and diverge. Both recognize the need to adjust the current international order and acknowledge the importance of taking action in areas such as security, climate change, and multilateral governance. These areas present opportunities for strengthening their relationship. The ideology of the stronger nation will serve as a model for the weaker one, and therefore, in areas of divergence, it is crucial to promote China’s ideology through multiple channels and platforms to correct misconceptions.

On one hand, this can be achieved through widespread promotion on the international stage. In recent years, General Secretary Xi Jinping has delivered influential keynote speeches at various international forums, including “Building a Community with a Shared Future for Mankind”, “Deepening Global Development Partnerships to Build a Global Community of Development”, and “Building an Open, Inclusive, and Interconnected World for Common Development”, all of which aim to help the world understand China’s ideology. Moving forward, China can continue on this path by explaining its ideology at international events such as the United Nations, the “Belt and Road” Forum for International Cooperation, and the G20 Summit. On the other hand, bilateral interactions can deepen China’s ideological influence. This requires both proactive promotion and addressing misconceptions. First, cooperation should be strengthened within existing bilateral frameworks. For example, by continuing to implement the “China-UK Joint notification on Building a Global Comprehensive Strategic Partnership for the 21st Century” and the “Memorandum of Understanding on Sustainable Cities Cooperation between the Governments of China and the UK”. Second, China’s embassy in the UK and Chinese business associations can play an active role in promoting China’s ideology. Furthermore, high-level interactions should be deepened. For instance, on 30 August 2023, Wang Yi, a member of the Political Bureau of the CPC Central Committee and Foreign Minister, held talks in Beijing with UK Foreign, Commonwealth, and Development Affairs Minister Liz Truss. During this meeting, China emphasized that dialogue and cooperation are key aspects of its policy towards the UK while stressing that China’s core interests must not be ignored. Future interactions should express goodwill, while also firmly safeguarding China’s interests when necessary.

It is also noted that the “special relationship” between the UK and the US is not unshakable. The “special relationship” between the UK and the US is a special case in the history of international relations under specific historical conditions. The fundamental condition that gave rise to the “special relationship” between the UK and the US was the once “special” interests and connections between them. However, due to reasons such as the UK’s withdrawal from the European Union, the decline in the UK’s strategic “usefulness” to the US, and the weakening of the UK’s strength, it is only a matter of time before the “special relationship” between the UK and the US comes to an end (Lin 2019).

5.3.2. Normative Aspect

Norms refer to the shared expectations of appropriate behavior held by actors, encompassing laws, rules, and similar elements, with an intersubjective nature. These can be understood through the lens of the life-cycle theory and the norm diffusion model, which suggests that influencing the use of the UK’s foreign investment security review mechanism can be approached from both multilateral and domestic levels.

Firstly, it is crucial to strengthen research and utilization of the UK’s foreign investment security review mechanism. This not only demonstrates China’s respect for the UK’s rules, thereby alleviating British concerns regarding Chinese enterprises, but also provides a reasoned basis for counteracting such concerns and protecting China’s own interests. On one hand, efforts should be made to understand the operation model, characteristics, procedures, and remedial measures of the mechanism. In addition to maintaining active communication with the Chinese commercial counselor’s office and representative offices in the UK, hiring local investment consultants or legal teams to gain insights into the local context can be beneficial. Simultaneously, continuous communication with the UK authorities responsible for foreign investment security review should be maintained. Given the advanced nature of the UK’s infrastructure for information and data, China’s enterprises can take full advantage of the publicly disclosed information or official communication channels to access real-time updates. Furthermore, lessons can be learned from both successful and unsuccessful cases involving Chinese investors in the UK, enabling the preparation of relevant contingency plans to avoid potential pitfalls.

On the other hand, counteracting within the framework of the mechanism demonstrates respect for the rules while striving to protect the interests of enterprises. Section 49 of the NSI Act clearly specifies matters subject to judicial review, stipulating that investors can seek judicial review of specific decisions made under the mechanism, primarily those based on Sections 19, 20, and 21 of the NSI Act. Although these provisions mainly address matters related to information acquisition, disclosure, and security protection, which may fall short of providing full protection for investors, they still offer a degree of remedy in terms of information-related losses.

Secondly, actively utilizing multilateral and bilateral rules to promote the formation of new multilateral and bilateral frameworks is essential. China and the UK signed a bilateral investment treaty (BIT) in 1986, and in 2015, they issued the “Joint notification on the Building of a Global Comprehensive Strategic Partnership for the 21st Century”. China can leverage existing frameworks to explore new possibilities. One approach is to attempt to establish new rules. The Joint notification from 2015 emphasized the importance of investment to both parties in points 10 and 19. However, the China–UK BIT is relatively outdated. Given the potential signing of a China–EU BIT and the restart of economic discussions between China and the US, there is room for the UK and China to initiate negotiations for a new investment agreement. This could lead to the inclusion of provisions for national security review in the new agreement, thereby enhancing the stability and predictability of national security review mechanisms. For example, the new agreement could introduce provisions on national security concepts, clarify the scope of security exception clauses, and set up international channels for reviewing security-related disputes. Another option is to make use of existing rules. Article 3 of the China–UK BIT grants investors national treatment and most-favored-nation treatment, while Article 5 outlines specific conditions for expropriation. If a Chinese investor in the UK faces treatment that is less favorable than that of UK nationals or nationals from other countries, or if a decision regarding foreign investment security review amounts to unreasonable expropriation, they could hold the UK government responsible. The method for asserting such claims can be based on Article 7 of the BIT, which specifies dispute resolution procedures between nationals or companies and the host country. It also provides for friendly consultations to resolve disputes over expropriation compensation. If consultations fail, the dispute should be submitted to international arbitration. Lastly, new channels could be explored. On 16 July 2023, the UK officially joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and China, following the UK, is the second-largest economy to apply for membership and is actively pushing for its inclusion. Should China successfully join the agreement, it can leverage relevant CPTPP provisions to coordinate its position with the UK’s foreign investment security review mechanism.

6. Conclusions

The UK has traditionally been a country with a relatively open foreign investment environment, and the timeline for the establishment of its foreign investment security review mechanism provides insights into this trend. However, with shifts in international dynamics, such as Brexit and the rapid development of China’s economy, the UK has experienced a transformation in its identity perception, leading it to address these changes through foreign-related domains. The UK’s foreign investment security review mechanism is designed to be highly instrumental, meaning it can be readily activated or deactivated as needed. The decision to activate or deactivate this mechanism is similarly influenced by the country’s evolving identity perception. Given this context, China can take a two-pronged approach, working both ideologically and normatively to assist in adjusting the UK’s identity perception during the process of engaging with the world, and with the UK in particular. Ideologically, China can promote concepts such as the “Community of Shared Future for Mankind”, while normatively, it can utilize the UK’s foreign investment security review mechanism and contribute to the formation of new rules. Additionally, to mitigate the NSI Act’s discriminatory impact, China could challenge its WTO compliance through multilateral forums. A potential “non-violation complaint” could argue that the Act nullifies China’s legitimate expectations of market access under the UK’s GATS commitments. By doing so, China may significantly increase the likelihood of ensuring that the mechanism remains stable and predictable, potentially “putting it down” rather than allowing it to become a fluctuating tool.