China sets up mechanism to oversee foreign mergers, acquisitions of domestic firms

10:24, February 13, 2011      

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The general office of the State Council, or China's Cabinet, has decided to establish a ministerial joint committee for undertaking national-safety reviews of foreign mergers and acquisitions of domestic firms.

That was learned from a circular posted on www.gov.cn, the Chinese government's website, Saturday.

According to the circular, the check involves foreign mergers and acquisitions of Chinese military industry enterprises and supporting firms, companies near "major and sensitive military facilities", and others relevant to national defense of China.

Reviews will be also needed for foreign mergers and acquisitions of Chinese enterprises in sectors involving national security that may be controlled by foreign investors after being acquired such as major agricultural products, major energy and resources, infrastructure, transportation services, key technologies and equipment manufacturers.

The review assesses the merger's or acquisition's influence on national defense, productivity, supply capacity of service, the national economy, the order of public life, as well as on the research and development of the country's key technologies, the statement said.

The committee, overseen by the State Council, will be led by the National Development and Reform Commission and the Ministry of Commerce (MOC).

Foreign investors looking to acquire domestic firms should file applications to the MOC, according to the circular.

It said that the MOC could suspend mergers or acquisitions by foreign investors, which may have a significant impact on the national security upon demand of the committee. The ministry may also take other measures, including stake or asset transfers, to eliminate the impact of a merger or acquisition on China's national security.

The policy, dated Feb. 3, will take effect in 30 days after the issuance of the circular.

Source: Xinhua
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