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China to Perfect Merger and Acquisition Laws
Assistant to the Minister of MOFTEC Ma Xiuhong told reporters that China was currently working to perfect laws governing mergers and acquisitions. She said that such work would improve the investment environment for multi-national enterprises.
Ms. Ma pointed out that mergers and acquisitions were an important part of international investment. Multi-national investment reached $1000 billion worldwide last year and 80% of the total was by mergers and acquisitions. China saw $40.7 billion in direct investments last year but little by way of mergers. The gap was due to problems with the current laws. Perfecting these laws is essential to increasing multi-national investments.
China has already revised the Laws on Foreign Equity Joint Ventures. The new amendments make no prohibitions on mergers and acquisitions. There are some different opinions on the problem. Ma Yu, a senior researcher with the MOFTEC said Tuesday that mergers in China faced many immature conditions besides laws. Mergers in China require government approval. Second, The capital markets, including the security market and property rights market, have no rules on mergers. As a result, companies have no market to complete mergers. Third, we lack agencies such as investment banks, law firms and accounting offices.
Although there are many difficulties, Yu Weixiang, director of a WTO research center thought some improvements have been seen in Beijing. Though direct investment, such as establishing joint ventures accounts for over 70% of total investment, in recent years, co-operation between multinational companies and China has improved even further. For example, 150 listed multinationals in Fortune 500 have invested in Beijing. They have established up to 11 regional headquarters, 20 R D centers. To multinational firms such direct investments will become the basis for future mergers and acquisitions.
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