Is China's review mechanism for foreign mergers and acquisitions over-restrictive?

: illustrations of China's equipment manufacture industry

Abstract

Following the rapid growth of foreign mergers and acquisitions (M&A) associated with foreign direct investments (FDIs) in China, the Chinese government has introduced a review mechanism for foreign M&A of Chinese enterprises in response to the significant impact they have had . This dissertation will analyze the review mechanism using the equipment manufacturing industry (EMI) as the research subject, with the aim of carrying out an in-depth discussion on the review mechanism in an attempt to amend academic deficiencies in foreign M&A legislation in China. This dissertation will focus on the following: (1) whether the review mechanism for foreign enterprises have served the actual needs and satisfied the original purposes of such reviews; (2) whether those reviews are too restrictive or too rigid; and (3) what should be improved during the implementation of the review mechanism. Applying the methodology of comparison analysis to each type of legislation for foreign M&A review, this dissertation will strive to conduct the research in a balanced manner and critically analyze the trend of Chinese protectionism in foreign M&A-related legislation, followed by a summary of implications and suggestions to optimize the effect of foreign M&A legislation. Moreover, this dissertation has selected EMI statistics from the China Statistical Yearbook for each year and uses the enforcement cases of the Ministry of Commerce (MOFCOM) for the reasoning behind the concentration of foreign M&A of China s EMI enterprises to illustrate the real practice of the review mechanism for foreign M&A transactions. After a detailed discussion on the review mechanism, namely, the Industrial Entrance Review, the Antitrust Review, and the National Security Review, of foreign M&A of China s EMI enterprises, this dissertation will summarize the findings accordingly and present the following conclusions: (1) By providing a broader and deeper industrial entrance for foreign M&A, rather than restricting them to the scope of low-end manufacturing industries, Chinese EMI enterprises will be placed into a fair-competition market environment and China will subsequently have better and safer industry conditions; (2) The actual situation of the state-owned enterprises (SOEs) monopoly (by means of administrative monopoly) in the EMI indicates that the elimination of the administrative monopoly in the EMI (combined with wider foreign M&A participation and less restrictions on the entrance of foreign M&A) will further improve the development of the entire industry; and (3) China s national security review of foreign M&A should avoid the tendency toward economic nationalism. Finally, this dissertation will draw implications and provide suggestions based on the findings presented.

Date of Award	16 Feb 2015
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Xin Frank HE (Supervisor)