Ministry Of Commerce: Foreign Capital Merger And Acquisition Of Domestic Enterprises Shall Not Evade Safety Review.

Reporters yesterday learned from the Ministry of Commerce, the Department recently announced the Ministry of Commerce to implement foreign investors' acquisition of domestic enterprises safety review system (hereinafter referred to as "Regulations"), and will be formally implemented in September 1st this year.

In February 3rd this year, the State Council issued a notice to set up an inter ministerial joint conference system (hereinafter referred to as the "joint meeting") to conduct a safety review of the merger and acquisition activities of foreign enterprises in China.

When foreign investors are required to purchase domestic enterprises, if they involve important agricultural products, important energy and resources related to national security, they must be subject to safety review.

The scope also includes military and military supporting enterprises.

In August 25th, the Ministry of Commerce issued the "Regulations" that all enterprises belonging to the scope of the above safety review shall apply to the Ministry of Commerce for a review of the application for merger and acquisition safety. The Ministry of Commerce shall inform the applicant in writing within 15 working days, and shall submit a joint meeting for examination within 5 working days thereafter.

The regulation also states that foreign investors may not evade the acquisition of securities in any way in real terms, including, but not limited to, generation, trust, multi-level reinvestment, lease, loan, agreement control, and overseas pactions.

Will not change the open policy

Liu Yuanchun, vice president of the Renmin University of China's School of economics, said the promulgation of the regulations was a symbol of our country

According to the data previously released by the Ministry of Commerce, in 2010, China absorbed foreign capital amounting to US $105 billion 740 million, and foreign investment accounted for only 3%.

However, the total foreign direct investment in the same year amounted to US $1 trillion and 120 billion, of which over 70% were investment through M & A.

Yao Jian, a spokesman for the Ministry of Commerce, once said that many countries have similar safety review mechanisms from a global perspective.

The establishment of the system will be conducive to China's next opening to the outside world.

The head of the NDRC also said that the system will not change China's policy of opening to the outside world and utilizing foreign capital.

It is reported that before the provisions were promulgated, relevant ministries and commissions of the state have managed foreign capital mergers and acquisitions through the form of foreign capital access management and concentration of operators' antitrust examination.

Relevant

foreign capital

In recent years, the number of foreign investment in China has increased significantly.

For example, in 2010, the French Coty group bought about 60% of TJOY's stake in the "cash plus stock" approach, involving an amount of US $400 million. The French drugmaker Sanofi Aventis, with a US $520 million 600 thousand Bmp Sunstone Corp, was successfully approved by the relevant departments.

However, some pactions were fruitless.

In 2005, Carlyle Group bought 85% of China's largest construction equipment manufacturer Xugong Group for $375 million, but suffered many problems because of its controlling stake.

In 2008, the joint venture which had been working hard for nearly 3 years was abandoned because it failed to get the approval of the regulatory authorities.

In 2009, Coca Cola Co bought the largest Chinese juice maker Huiyuan company for HK $17 billion 920 million, but finally failed to pass the antitrust review of the Ministry of Commerce.

The acquisition has also become the first unsuccessful case since the implementation of China's anti-monopoly law.