The newly established State-owned Assets Supervision and Administration Commission (SASAC) is preparing for an International Merger & Acquisition (M&A) Summit. The event is to being organized jointly with the United Nations Industrial Development Organization (UNIDO). This new move by the state assets watchdog comes close on the heels of its recent international search for top managers to come to China in a pilot scheme aimed at strengthening the work of selected state-owned enterprises.
The M&A Summit has been scheduled for November 19 and 20 in the Great Hall of the People in Beijing. The guest list features many business leaders from household name companies. Participants will also include high-level executives of bourses, law firms, accountancy firms and management consultancy firms. The delegates will be drawn from both within China and overseas.
What is particularly noteworthy is that representatives from China’s 191 large state-owned enterprises (SOEs) directly under the leadership of SASAC have also been invited to attend.
The main theme for the summit will be "Transnational Mergers & Acquisitions and Economic Restructuring in China". It will also address the issues of ongoing trends in transnational M&As and China's economic development strategy. The upcoming forum is set to provide an ideal platform for domestic companies wishing to strengthen their links with foreign investors.
Growth in transnational merger & acquisition activity has outstripped even that in foreign direct investment (FDI). Since the 1990s, M&As have seen annual growth of around 30 percent compared with 15 percent growth in FDI.
However despite the growth in M&As, joint ventures are still the main vehicles for FDI. Last year China become the largest FDI destination in the world with its total of US$52.7 billion but only 5 percent of this was due to M&As.
As China continues to develop its market economy, transnational M&As will have their part to play in contributing to the work of restructuring the state economic structures. Their input can help in optimizing the allocation of resources, in establishing a modern enterprise system and in improving corporate governance. China is therefore considering adjusting its foreign investment policies to encourage transnational M&As.
SASAC is well aware of the importance of the participation of Chinese enterprises in transnational M&As. The commission’s handbook advises that, "Chinese enterprises should respond proactively to current transnational M&As, participating in them in order to accelerate their own development".
China's WTO entry has accelerated its integration into the world economy. Since November last year, the commission has worked on bringing in a number of positive measures. These have included temporary regulations for foreign investment used to transform state-owned enterprises and regulations concerning notice given on the transfer of listed companies' holdings of state shares and individual shares to foreign-funded companies together with regulations on qualified foreign institutional investors (QFII). These regulations have laid down a legal framework for foreign mergers and acquisitions so paving the way for entry into the Chinese market.
In addition, the state assets watchdog has been working on reducing the timescale for the introduction of the necessary laws and regulations.
According to the commission, "China is opening its doors in line with its WTO commitments, so many foreign investors have become interested in domestic state-owned enterprises, the securities market and the financial sector".
It also points out that, overseas ventures undertaken by Chinese enterprises, though still small in number and on a small scale, are also poised for rapid expansion.
(China.org.cn by Tang Fuchun, November 11, 2003)