China should accelerate its improvement of laws and regulations
on mergers and acquisitions of domestic companies by foreign
capitals, which, if not cautiously handled, might jeopardize the
nation's industry security, some lawmakers said ahead of the top
legislature's annual session.
The country needs improved regulations and laws to guide and
manage foreign mergers and acquisitions to ward off monopoly by
overseas companies and ensure national industry's security, said Ma
Jinquan, a deputy to the National People's Congress (NPC), China's
top legislature, which will open its annual full session on
Monday.
Ma, a director of the Anshan Iron and Steel Group Corporation in
northeast Liaoning Province, suggested the country enact such
regulations as early as possible to encourage fair competition,
standardize mergers and prevent industry monopoly.
Citing Xugong Group Construction Machinery as an example, NPC
deputy Qin Chijiang said it is very short-sighted for some local
companies to sell their brands with a hard-won fame to foreign
companies for capitals.
The country's largest construction machinery manufacturer and
distributor agreed last year to sell 85-percent of its shares to
global private equity firm Carlyle Group.
"Xugong made a historical mistake," Qin, secretary-general of
the China Society for Finance and Banking, said.
"If they need capitals, why not turn to domestic channels?
Either private funds or national finance should be available," Qin
said.
China has beaten other developing countries to become the most
favorite destination for overseas capital, also resulting in an
emerging trend of foreign mergers and acquisitions in the country
in recent years. Currently, foreign capitals mainly focus on energy
sources, machinery manufacturing, food and consumer goods, commerce
and financial service for mergers.
However, rising with the merger trend are concerns over the loss
of state assets and the security of national industry.
A Ministry of Commerce official said the ministry is trying to
balance the protection of indigenous industries and the investment
enthusiasm of foreign companies.
"Foreign mergers and acquisitions should be conducive to the
country's economic development and industrial rejuvenation.
Relevant departments should have a rational judgment," said NPC
deputy Guo Xiangdong.
Foreign direct investment used in China topped US$69.47 billion
last year, bringing the total foreign investment used to US$685.4
billion.
The country so far has more than 590,000 foreign-invested
companies with 41,485 newly established last year, official data
revealed.
(Xinhua News Agency March 4, 2007)