BEIJING - Chinese
officials have reassured overseas investors that
the country still welcomes foreign investment in
the form of mergers and acquisitions (M&As),
amid domestic worries that they may threaten
national economic security.
The message
was sent via a string of positive comments on
foreign M&As made by Chinese officials.
Chinese businesses should neither demonize
nor make light of foreign mergers and acquisitions
in a globalizing economy, the People's Daily
quoted Liao Xiaoqi, vice minister of commerce, as
saying on Tuesday.
Speaking on the subject an investment
forum in Beijing two weeks ago, Liao said,
"Foreign investment in the form of mergers and
acquisitions could benefit the restructuring of
state-owned enterprises as well as the national
economy." Liao said the government would like to
see the healthy development of M&As under
proper regulation and management.
Liao
played down the negative side of foreign M&As
in recent comments, and said they could facilitate
foreign investment without the use of land, which
would avoid straining the land supply. He also
stressed that foreign M&As could bring badly
needed capital and technologies to state-owned
enterprises for restructuring and upgrades.
Minister of Commerce Bo Xilai also seemed
to be optimistic about foreign M&As, saying
they could bring new opportunities to Chinese
enterprises and China was just getting started in
this field. Commerce Ministry statistics showed
that foreign mergers and acquisitions account for
only 2.5% of all forms of foreign direct
investment in China, while the proportion averaged
80% worldwide.
However, foreign M&As
came under scrutiny in China as foreign companies
began to acquire major state-owned enterprises or
companies with famous brands in recent years, such
as private equity firm Carlyle's attempt to buy a
45% stake in Xugong Construction Machinery, the
country's largest construction-equipment maker.
China's top legislature has read for the
second time a draft anti-monopoly law that
requires foreign purchases of Chinese companies to
go through checks to ensure there is no negative
effect on China's national security.
The
Commerce Ministry issued a regulation requiring
foreign investors to apply for approvals from the
ministry "if their purchases of domestic companies
affect national economic security, take place in
key sectors or cause a transfer of the operating
rights of famous domestic brands". Previously,
only mergers and acquisitions worth more than
US$100 million needed the Commerce Department's
scrutiny and approval.
The government had
tightened supervision of foreign M&As in
industries such as power supply, power-grid
construction, the national defense and military
industries, petroleum production and key
manufacturing sectors, said Jin Bosheng, a
research analyst with the Commerce Ministry.
Meanwhile, both officials and economists
agreed that legislation governing M&A deals
should be established to ward off risks from
hostile mergers and acquisitions.
Long
Yongtu, secretary general of the Boao Forum for
Asia, said foreign mergers and acquisitions are
not "great scourges", but added that supervision
of the process is important.
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