"The formulation of the regulations have already come to the final stage and are likely to be unveiled within the year," said Zhou Xiaoyan, director of the Department of Treaty and Law at the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) on Thursday.

"We are working on some detailed issues and planning to hold discussions with lawyers in the field and some transnational companies," she said.

Foreign purchases can be extended to State-owned enterprises and privately owned enterprises, she said.

"The birth of the regulations will be conducive to attracting more foreign investment in the years to come," said Professor Lu Jinyong with the University of International Business and Economics.

"They will help foreign investors ease worries such as market restrictions by directly addressing them," he told China Daily yesterday.

Riding on the wave of worldwide mergers and acquisitions, many transnational companies, lured by the enormous market potentials after China's World Trade Organization entry, all have their eyes locked on to Chinese enterprises.

Lu believes that in the coming five years there would be a boom in foreign investment.

He said as China is on its way to fulfil its commitment to the World Trade Organization by lifting more and more investment restrictions, mergers and acquisitions will become a dominant way to attract foreign investment.

"Also, in the coming five years, mergers and acquisitions between foreign companies and domestic companies, and between different domestic companies will also increase as a result of the regulations," the professor said.

Mergers and acquisitions have long constituted a major part of international investment. Figures indicate that last year, transnational investment worldwide totalled US$1 trillion. More than 80 per cent of the investments were made through acquisitions.

Last year, China attracted the actual utilized foreign direct investment of US$45.7 billion. However, only 5 to 6 per cent of the total investment was from foreign mergers and acquisitions, a very modest figure compared with other countries.

With the approaching regulations on foreign-investment mergers and acquisitions, China is also going to change its enterprises asset evaluation system as well, said Hu Jingyan, director of the Department of Foreign Investment at MOFTEC.

The domestic enterprise asset appraisal system needs to be adjusted to be in line with international practice, he said.

Zhou also said a legal framework has already been established in China after its entry into the World Trade Organization.

"We are also enacting related laws on agriculture and insurance," she added.

(China Daily August 17, 2002)