An official with the ministry of commerce said China plans to
revise regulations on foreign mergers and acquisitions to defend
the country's industrial security and make better use of foreign
investment.
Sun Xiaohua, deputy director of the Foreign Investment
Department of the Research Institute of the Ministry of Commerce,
broke the news to the Shanghai-based China Business News on
Monday.
He said that the 2004 regulation set a good framework but didn't
touch upon foreign mergers and acquisitions in important sectors
that may jeopardize China's industrial and economic integrity.
As more foreign firms chose to invest in China through mergers
and acquisitions rather than establishing new companies, experts
have urged market watchdogs to stay alert for malicious takeovers
by foreign companies.
China's official data shows that a record high 21 mergers and
acquisitions occurred over the first six months of the year. Only
three involved domestic companies acquiring overseas firms. The
average takeover price of the other 18 foreign mergers rose to a
record high of US$160 million.
In contrast, the number of foreign-funded companies set up in
China over the same period fell by 6.89 percent to 19,750.
In its new five-year plan released earlier this year the Chinese
government indicated it wanted to use foreign mergers and
acquisitions to facilitate the reform of state-owned enterprises
and industrial restructuring.
Along with the more active foreign mergers and acquisitions,
however, are rising concerns over the loss of state-owned assets
and low prices paid by foreigners in their takeovers.
The latest controversial case involves the Carlyle Group of the
United States which agreed to pay US$375 million to purchase a
subsidiary of the Xugong Group, China's construction and machinery
giant, which has yet to be approved by Chinese regulators.
(Xinhua News Agency July 18, 2006)