Protecting National Security: An Increasingly Important Dimension of Chinese SOE Investments

This chapter examines the increasing role of Chinese SOEs in outbound FDI, focusing on the growing emphasis on national security. Since China’s emergence as a major source of global FDI, Chinese SOEs have aligned their investment strategies with national policy objectives. This chapter explores the impact of China’s latest SOE reforms and geopolitical tensions on the national security-driven FDI of Chinese SOEs. The research addresses two key questions: what are the policy drivers behind Chinese SOE FDI in developed countries, and how have SOE reforms shaped their ability to pursue national security objectives? By analysing China’s foreign investment policies, the chapter argues that national security has become a central driver for outbound FDI, with SOEs playing a significant role in securing strategic assets such as energy, critical minerals, and technology. The findings highlight that Chinese SOEs, in response to tightening foreign investment controls, employ tactical alliance strategies to minimise barriers in developed countries. The chapter emphasises the potential risks posed by these investments to host countries and calls for tailored legal frameworks to mitigate these challenges. It concludes by underscoring the importance of understanding the interplay between national security concerns and Chinese SOE investment strategies.