China's long awaited anti-monopoly law is expected to be passed
next week, requiring foreign companies to go through both
anti-monopoly and national security checks when merging with or
taking over Chinese enterprises.
"As well as anti-monopoly checks stipulated by this law, foreign
mergers and acquisitions of domestic companies or foreign capital
investing in domestic companies' operations in other forms should
go through national security checks according to relevant laws and
regulations if the cases are related to the issue," the latest
version of the draft said.
The adjustment was to make the regulation clearer, Jiang
Qiangui, deputy director of the Law Committee of the National
People's Congress (NPC) told the ongoing session of the NPC
Standing Committee on Friday when submitting the bill for
consideration. The previous version only said foreign investors'
mergers and acquisitions of domestic companies should go through
national security checks.
She said the draft law was "ready for adoption". The draft is
expected to be put to the vote next week and, if it is passed, is
expected to take effect on August 1, 2008.
The requirement for a national security check was added to the
draft as a result of increasing foreign mergers and acquisitions in
the country.
The number of foreign mergers and acquisitions only accounted
for 5 percent of all forms of foreign direct investment in China
before 2004. The figure increased to 11 percent in 2004 and to
almost 20 percent in 2005.
The draft also added a provision, saying, "Companies that can
provide evidence to prove they have no dominant status in the
market should be cleared of monopolistic charges."
Learning from the experiences of a number of Western countries,
China's draft anti-monopoly law not only prohibits monopoly
agreements and abuse of a dominant market position, but also the
abuse of administrative powers to exclude and restriction
competition, said Wang Xiaoye, a senior researcher at the Chinese
Academy of Social Sciences.
The anti-monopoly law was first drafted in 1994 and submitted
for its first review in June 2006. It was submitted for its second
review in June this year.
(China Daily August 25, 2007)