China is considering revising its policies concerning cross-country
mergers and acquisitions to attract foreign direct investment
(FDI), foreign trade officials said.
Ma
Xiuhong, assistant minister of foreign trade and economic
co-operation, made the remark last week at a conference marking the
release of the World Investment Report 2001 by the United Nations
Conference on Trade and Development (UNCTAD).
She said there would be some revisions to existing laws and
regulations concerning mergers and acquisitions in the near future
geared towards allowing China to use this new FDI model under the
present legal framework.
Ma
said China's FDI growth is likely to exceed 10 per cent this year
given that China's contracted FDI - a major part of this year's FDI
- saw a robust growth last year and in the first half of this
year.
"We estimated the growth to stand at 10 to 15 per cent this year,
but considering the FDI growth in the first eight months, which is
up 20.79 per cent from last year's period, we have been rather
conservative," she said.
"I
think we can realize our estimated growth this year," she said,
adding that China has not seen a 10 per cent annual FDI growth
since the Asia financial crisis hit in 1997.
Considering the increasing importance of international mergers and
acquisitions in global FDI growth, Ma said China has been
researching the possibility of ushering in the new FDI policy.
Over 95 per cent of China's FDI is directed towards building new
enterprises, but the UNCTAD report shows that the proportion of
this traditional pattern in total FDI has been dropping while
mergers and acquisitions increased by 50 per cent last year from
the previous year.
However, Ma cited two reasons explaining why it was not yet time to
introduce the mergers and acquisitions framework in China.
First, China has few enterprises that can be included into the
global strategy of multinational companies, she said, adding that
most of the mergers and acquisitions that have taken place so far
were between developed countries.
Second, China still has limitations on the opening of the
telecommunications, finance, State security, petrochemical and
media industries - the hot sectors for international mergers and
acquisitions.
Ma
insisted that it was still necessary to maintain these
limitations.
China's present legal system also makes it very complicated for
foreign investors to conduct mergers and acquisitions in China, she
said.
China examined over 1,500 laws, regulations and documents
concerning foreign trade last year and found that over 500 of them
should be eliminated, around 200 should be revised according to
World Trade Organization (WTO) rules, and over 20 new regulations
should be laid down.
Ma
noted that China will strive to complete the revision and drafting
before the end of this year, and laws concerning foreign-funded
enterprises that did not adhere to WTO rules had been revamped.
UNCTAD report
The report by UNCTAD shows that global foreign direct investment
increased by 18 per cent from 1999, reaching US$1.3 trillion in
2000. The dramatic increase in international mergers and
acquisitions, which jumped 50 per cent to US$1.1 trillion,
contributed heavily to the rise.
But FDI worldwide is expected to edge down this year - the first
time in the last 10 years - on reduced mergers and acquisitions,
and the world economic slowdown.
The report warns that developing countries must make more efforts
than developed countries to attract foreign investment this
year.
Zheng Zhihai, director of MOFTEC's foreign trade research
institute, said it was important for governments of developing
countries to better co-ordinate the relationship between foreign
investors and local enterprises.
(
Business
Weekly 09/26/2001)