Li Deshui, director of the National Bureau of Statistics (NBS), warned on Monday about the acquisition of domestic businesses by transnational corporations.

"We have been welcoming foreign investment but now we have to curb any attempt to monopolize the Chinese market," said Li, also a member of the 10th National Committee of the Chinese People's Political Consultative Conference (CPPCC), which is in its Fourth Plenary Session.

Foreign investment in China has shown new trends since 1995, Li said. Transnational companies have launched a massive wave of buying Chinese companies, especially those dominating a particular sector or having significant potential for expansion.

More than 80 percent of China's supermarkets are in the hands of transnational companies and a number of other sectors involving beer and skin-care products are almost entirely monopolized by foreign firms.

"Any sovereign state will not allow such a thing to happen," said Li.

Some countries have enacted laws forbidding business acquisitions that would result in a monopoly being created. In Canada merger and acquisition deals valued above US$200 million need government approval. The US government and Congress also set requirements on business acquisitions by foreign companies.

"If we allow hostile takeovers to happen without limitations we will gradually lose our domestic brands and capability to innovate," said Li.

The consequence, he said, is that China may become just a link in international marketplaces and receive the smallest percentage of any profits. Most corporate profits would be diverted away from China by transnational companies, leaving the country with only nominal GDP figures.

Premier Wen Jiabao has mentioned in his government work report, delivered on March 5 to nearly 3,000 deputies to the National People's Congress (NPC), that to open further to the outside world the country must "pay particular attention to safeguarding China's economic security."

"The new circumstances require us to constantly improve on our level of opening-up and also gradually improve our polices on using foreign investment," said Li.

"Laws and regulations on business acquisitions by foreign companies should be approved as quickly as possible in line with international practices," he said. "There should be severe measures to curb and even punish hostile takeovers aiming to monopolize segments of the Chinese market."

(Xinhua News Agency March 8, 2006)