Mexico redefines its foreign investment framework: new legal considerations for Chinese companies

Mexico is moving forward with a reform of its Foreign Investment Law that could reshape the terms for international capital to enter strategic sectors by introducing a specific review process for acquisitions on national security grounds.

The initiative, introduced by the government of Claudia Sheinbaum and approved by the Senate on 30 September 2026, was sent to the Chamber of Deputies to continue through the legislative process.

The proposal represents a significant change to Mexico’s foreign investment regime, which has traditionally focused on sectoral restrictions, ownership limits and certain administrative authorisation requirements.

The new approach would allow authorities to assess not only the economic characteristics of an acquisition but also its potential implications for national security, strategic infrastructure and control of sensitive technologies and information.

Although the reform would apply to investors of any nationality, it is particularly relevant to Chinese companies with interests in Mexico, especially in manufacturing, energy, strategic minerals, technology infrastructure and international supply chains.

Acquisitions above 49% subject to special review

The reform provides for a screening process for certain foreign investments involving an interest of more than 49% of the share capital of a Mexican company.

Not all acquisitions above that threshold would automatically be subject to the new process.

Mandatory review would also depend on the company’s asset value and its activities in sectors considered sensitive to national security.

The activities covered include strategic infrastructure, critical technologies and dual-use products, essential inputs, food security, and access to or control of sensitive information.

The text proposes that the National Foreign Investment Commission (Comisión Nacional de Inversiones Extranjeras, CNIE) could authorise transactions, impose conditions to mitigate risks or block certain acquisitions.

One amendment made during the legislative process reduced the proposed ordinary decision period to 45 business days .

The initiative also provides for possible corrective measures, administrative penalties and divestment obligations in certain circumstances.

These provisions could introduce new conditions precedent and more extensive regulatory analysis requirements in M&A transactions.

Defence, Navy and Security authorities would take part in investment oversight

One of the most significant elements of the reform is the expansion of the CNIE’s membership.

The text approved by the Senate provides for the inclusion of representatives from the secretariats of National Defence, the Navy, and Security and Citizen Protection, as well as the Digital Transformation and Telecommunications Agency.

The participation of these authorities reflects an intention to incorporate national security considerations into the assessment of foreign investments.

The model also provides for coordination mechanisms with other public institutions, including bodies involved in intelligence, taxation and the prevention of illicit activities.

For international companies, this framework would entail a broader regulatory assessment than the traditional corporate and economic review.

Why the reform is particularly relevant to China

Mexico holds a strategic position for Chinese manufacturers and investors because of its industrial integration with the United States, its manufacturing base and its network of trade agreements.

The automotive industry is one of the clearest examples.

In February 2026, Reuters reported that Chinese manufacturers BYD and Geely were among the finalists interested in acquiring a Nissan and Mercedes-Benz automotive plant in Aguascalientes.

The facility has an approximate annual capacity of 230,000 vehicles.

The interest shown by Chinese manufacturers reflects Mexico’s importance as a potential industrial base for supplying markets in Latin America and North America.

However, transactions of this kind take place in a complex trade environment shaped by US tariff policies, rules of origin and the review of the trade agreement between Mexico, the United States and Canada.

The possible adoption of a new national security regime would add another regulatory dimension to acquisition and business expansion decisions.

The interest shown by BYD and Geely is a publicly reported potential acquisition process, not a transaction whose completion has been confirmed.

Implications for M&A legal teams

The reform could substantially change the planning of transactions between Chinese investors and Mexican companies.

First, advisers will need to assess whether the target company operates in a sector subject to review and whether the investment meets the relevant thresholds.

Identifying the investor’s ownership structure and ultimate beneficial owners would also become important, particularly where holding companies or investment vehicles in different jurisdictions are involved.

Regulatory due diligence would need to cover strategic infrastructure, sensitive technologies, data protection and national security.

From a contractual perspective, conditions precedent tied to authorisations, regulatory risk allocation clauses and dispute resolution mechanisms could become more important if an authority imposes conditions on or blocks an acquisition.

The parties will also need to assess the impact of potential administrative delays on long-stop dates and financing commitments.

Any national security review would be separate from the economic competition assessment, although a single transaction could be subject to both processes.

A regime that has yet to complete the legislative process

The reform was backed by the Senate by 65 votes to 30 in the general vote.

The bill was subsequently sent to the Chamber of Deputies, where it was referred to the Committee on Economy, Trade and Competitiveness.

The legislative information reviewed does not confirm its final approval or entry into force.

Accordingly, the obligations described relate to a proposed regime and should not be presented as legal requirements currently in force.

The progress of this initiative will be particularly important for Chinese companies considering control acquisitions or strategic investments in Mexico.

The possibility of subjecting transactions to specific national security criteria may affect investment structures, timetables and the contractual allocation of risk.

Key facts

• Reform: Mexico is processing an amendment to its Foreign Investment Law to introduce reviews on national security grounds
• Legislative status: Approved by the Senate on 30 September 2026 and sent to the Chamber of Deputies
• Proposed threshold: Certain foreign acquisitions of more than 49% of share capital, also subject to sectoral and asset-value criteria
• Sectors affected: Strategic infrastructure, critical technologies, dual-use products, essential inputs and activities involving sensitive information
• Authority: The National Foreign Investment Commission would assume new screening powers
• Chinese investment: The reported interest of BYD and Geely in a Mexican automotive plant illustrates the relevance of these issues to Chinese groups
• Legal impact: Potential new requirements for due diligence, authorisation, corporate governance and regulatory risk allocation
• Caution: The reform should not be treated as in force until the legislative process is complete and it has entered into force