In its most recent annual report to Congress, the Committee on Foreign Investment in the United States (CFIUS) reported that China now has more foreign investments undergoing US national security reviews than any other country. Here we highlight four imperatives for Chinese investors contemplating transactions that might warrant CFIUS review.

Be proactive. The United States is open for business, but politics dictates that Chinese investors need to plan carefully to succeed. This means not only consulting and filing voluntary notices with CFIUS at the onset of the review process, but also communicating with key US stakeholders when needed. CFIUS has a formal mechanism in its regulations for prior consultation. A number of proposed takeovers by Chinese companies have faced criticism from the US Congress. More effective outreach to both supporters and opponents in Congress could potentially have curbed some opposition.

Be cautious. As the dealmaking landscape changes, so does the nature of the CFIUS national security risk test. With this in mind, Chinese investors need to consider all aspects of a deal to determine if it warrants CFIUS review, from whether a deal involves the acquisition of critical infrastructure or technologies, to whether it could be targeted due to its geographic location. A Presidential order blocked Delaware-based Ralls Corp—which is owned by Chinese nationals—in its attempt to purchase four wind-farm projects because the farms were “all within or in the vicinity of restricted air space at Naval Weapons System Trading Facility Boardman in Oregon.” Ralls had chosen not to submit its original investment for CFIUS review. Careful due diligence can enable companies to better understand the considerations that might be of sensitivity to CFIUS.

Be flexible. Very few deals ultimately face CFIUS opposition. CFIUS will often, however, impose conditions prior to clearing a transaction. The increasing number of conditional approvals granted by CFIUS means that Chinese investors will need to be flexible and practical in how they structure their transactions to assuage concerns and to maximize their chance of obtaining clearance. For example, US investment targets may include lines of business with sensitive government contracts or defense-related work. Such business remains problematic for Chinese acquirers from a CFIUS perspective. Preemptively excluding such sensitive operations from a deal has enabled CFIUS to approve Chinese investments that otherwise may have been blocked. Stay informed. Sensitivities, justified or not, regarding Chinese investment affect the regulatory environment. The acquisition by Shuanghui International Holdings of Smithfield Foods, for example, triggered concerns about food safety. This, in turn, contributed to legislative efforts to make CFIUS review more restrictive. A bill was recently introduced in Congress that would, among other things, extend the scope of CFIUS review to include an analysis of “net benefit” to the United States based on criteria such as economic activity, employment, productivity, industrial efficiency, tech transfers, public health and safety, and well-being of US consumers. The consensus is that this bill will not be enacted in the current Congress, but could be the precursor of similar efforts in the future. It is important that investors stay informed of these developments and factor them into their strategy.