China should speed up revisions to its laws and regulations
governing mergers and acquisitions of domestic companies by foreign
firms to avoid jeopardizing the nation's industrial security, law
makers said over the weekend ahead of the legislature's annual
session.
The country needs improved legislative oversight to manage
foreign mergers and acquisitions in order to guard against
monopolies by overseas companies, said Ma Jinquan, a deputy to the
National People's Congress, which begins its annual session in
Beijing today.
Ma, a director of the Anshan Iron and Steel Group Corporation in
northeast China's Liaoning Province, suggested that the country
upgrade its regulations as soon as possible to encourage fair
competition and standardize the merger and acquisition process.
Citing Xugong Group Construction Machinery as an example, NPC
deputy Qin Chijiang said it is shortsighted for some domestic
companies to sell their valuable brands to foreign companies to
raise capital.
The country's biggest construction machinery manufacturer and
distributor agreed last year to sell 85 percent of its shares to
the global private equity firm Carlyle Group.
"Xugong made a historical mistake," said Qin, secretary-general
of the China Society for Finance and Banking.
"If it needs capital, why not turn to domestic channels? Either
private funds or national financing should be available," Qin
said.
The bid was ultimately blocked by the Ministry of Commerce.
Carlyle came back with an offer to buy 50 percent of Xugong, a
proposal that awaits regulatory approval.
China has surpassed other developing countries as the favorite
destination for overseas capital, resulting in an increasing number
of foreign mergers and acquisitions in recent years. Foreign
capital is focused mainly on energy resources, machinery
manufacturing, food, consumer goods, commerce and financial
services.
To counter security concerns and ensure proper growth, a
Ministry of Commerce official said China is trying to balance the
protection of indigenous industries and the investment enthusiasm
of foreign companies.
"Foreign mergers and acquisitions should be conducive to the
country's economic development and industrial rejuvenation," said
NPC deputy Guo Xiangdong.
(Shanghai Daily March 5, 2007)