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CURRENT MEASURES IN REPLYING TO CROSS-BORDER MERGERS & ACQUISITION IN CHINA

Time:2014-03-13 Hit:187

CURRENT MEASURES IN REPLYING TO CROSS-BORDER MERGERS & ACQUISITION IN CHINA


          Cross-Border Mergers & Acquisition has certainly had influences on China in many ways. However, it is totally wrong to be terrified of Mergers & Acquisition and put the clock back to the isolation age. The tide of global Mergers & Acquisition has brought about both challenges and opportunities. Therefore, Chinese enterprises are expected to face up to, study carefully and then solve difficulties. Only with the right methods and measures can we change difficulties into motivation, challenges into opportunities.

A. Establishing Right Security Concept

Now, with the weakening of the national industry concept, the idea of national industrial security is changing. As is shown in practice, one may not control an enterprise by controlling its shares. Therefore, it is impractical for most Chinese enterprises to pursue the control of shares when negotiating with Cross- Border corporations. However, it doesn’t mean giving up other controls to give up the control of shares. No matter in developed countries or developing countries, it has been an effective method for the government to control those large scale Cross-Border corporations by issuing regulations. So a government regulation control system is in bad need in China, in which the idea emphasizing the general international practise should be established. It has been shown in many countries’ opening practice that all of them will be safer only by interacting with each other in all industries. In the future, in addition to the introduction of foreign capital and technology, the portion of export should be increased, hence maintaining a proper ratio between the two.

B. Guiding the Direction of Mergers & Acquisition

Due to the profit-oriented purpose of Cross-Border Mergers & Acquisition in China, their investment will be in conflict with the development strategy of the Chinese economy. Chinese government should encourage Cross-Border corporations to extend to Middle and West China from East in order to promote the balanced development of China’s regional economy; government should also guide the Mergers & Acquisition pattern to encourage rescue and cooperative Mergers & Acquisition instead of hostile one such as that happened to Wahaha; government should put restrictions on the range of Mergers & Acquisition, in which some industries closely related to national economy and people’s livelihood, such as oil industry, manufacturing industry, banking industry, high exhaustion, high-pollution, poor-technology industries should welcome foreign investment. Reasonable guidance of Mergers & Acquisition will promote China to develop towards industrial advance.

C. Improving Independent Innovation Capacity

In the long term, although China has introduced a large number of advanced technologies and facilities from foreign countries, many enterprises still fall into a situation of “introduction-lagging-repeated introduction-repeated lagging” due to their failure in absorbing what they have introduced. It is shown in Haier and Huawei’s success stories that independent innovation is the source and motivation for an enterprise to exist and develop. Therefore, national enterprises should put much importance on staff training, improving their independent R&D capacity and promoting their own brands. In addition, the government should issue some policies and measures to encourage independent innovation in order to increase enterprises’ input in technological research and development.

D. Establishing Mergers & Acquisition Examination and Approval Institution and System

Measures for Strategic Investment by Foreign Investors upon Listed Companies, Stock Law and Regulations of Acquisition of a Listed Company have set a law framework for foreign capital’s acquisition of listed companies. However, the law itself is not enough. An institution in charge of the examination and approval of Cross-Border Mergers & Acquisition should be established to have an overall examination of some potential influences caused by Mergers & Acquisition on employment, technological level, and correlation degree among different industries, ecosystem, strategic resources and national security.

In addition, a set of examination and approval systems should be established to have careful property definition and asset assessment in order to prevent the state-owned asset from flowing out. Some state-regulated strategic industries, key enterprises, key products and key technologies should also be established to regulate foreign Mergers & Acquisition.

E. Establishing Industry Security Early Warning System

Such a system should be able to assess the security state of all industries firstly, to predict the future security tendency secondly and finally to deliver the information to government and enterprises. In addition, the security state of key industries should be paid special attention to in order to prevent Cross- Border corporations from monopolizing the whole industry.

Some industries involving insufficient or excessive competitions should be regulated in tome to keep a healthy, orderly and fair competition order.


Jianhong Huang Neil McGregor Ping Gong







shanghai attorney