Foreign takeover bids face China security check
Tuesday, June 26, 2007
FOREIGNERS who want to acquire Chinese firms will face tougher checks, state media warned yesterday, triggering concern among observers that overseas capital will face harder times in future.
China has written mandatory national security checks on foreign acquisition of domestic firms into a draft law, the first time the mechanism has been included in legislation, the China Daily said.
"Foreign mergers and acquisitions of domestic companies or foreign capital invested in domestic companies in other forms should be examined ... if the cases are related to national security," said the draft anti-monopoly law, according to the China Daily.
The draft law was submitted on Sunday to top legislators for a second reading, the newspaper said. Analysts said the draft signalled growing difficulties for foreign capital seeking to access the Chinese market as money is no longer the country's primary interest.
"It will be more and more difficult for foreign capital to enter into China," Andy Xie, an independent economist based in Shanghai, said.
"(The draft) reflects a big change in China's attitude towards foreign investment," he said. China was keen to attract foreign investment in the past due to the lack of funding at home but now the general sentiment has changed as it is trying hard to clear bubbles with excess liquidity rising domestically, he said.
However, multinational companies' interest in taking a stake in Chinese firms is growing as their performance in the country now affects their share prices on the global stock markets, Xie said. According to the China Daily, foreign mergers and acquisitions accounted for five percent of all forms of foreign direct investment annually up to 2004 but increased dramatically to 11 per cent in 2004 and nearly 20 per cent in 2005.
The startling growth stirred up rising concerns from both the government and the public that the Chinese economy ran a risk of falling prey to overseas monopolies if no measures were taken to curb foreign takeovers.
Six government agencies then issued a joint announcement in August last year requiring foreign investors to apply for approval from the commerce ministry when their purchases of domestic firms could affect national economic security.
They have also to obtain official approval if their acquisitions are in key sectors or will lead to the transfer of operating rights of famous domestic brands.AFP
China has written mandatory national security checks on foreign acquisition of domestic firms into a draft law, the first time the mechanism has been included in legislation, the China Daily said.
"Foreign mergers and acquisitions of domestic companies or foreign capital invested in domestic companies in other forms should be examined ... if the cases are related to national security," said the draft anti-monopoly law, according to the China Daily.
The draft law was submitted on Sunday to top legislators for a second reading, the newspaper said. Analysts said the draft signalled growing difficulties for foreign capital seeking to access the Chinese market as money is no longer the country's primary interest.
"It will be more and more difficult for foreign capital to enter into China," Andy Xie, an independent economist based in Shanghai, said.
"(The draft) reflects a big change in China's attitude towards foreign investment," he said. China was keen to attract foreign investment in the past due to the lack of funding at home but now the general sentiment has changed as it is trying hard to clear bubbles with excess liquidity rising domestically, he said.
However, multinational companies' interest in taking a stake in Chinese firms is growing as their performance in the country now affects their share prices on the global stock markets, Xie said. According to the China Daily, foreign mergers and acquisitions accounted for five percent of all forms of foreign direct investment annually up to 2004 but increased dramatically to 11 per cent in 2004 and nearly 20 per cent in 2005.
The startling growth stirred up rising concerns from both the government and the public that the Chinese economy ran a risk of falling prey to overseas monopolies if no measures were taken to curb foreign takeovers.
Six government agencies then issued a joint announcement in August last year requiring foreign investors to apply for approval from the commerce ministry when their purchases of domestic firms could affect national economic security.
They have also to obtain official approval if their acquisitions are in key sectors or will lead to the transfer of operating rights of famous domestic brands.AFP
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