Beijing tightens curbs as foreign investment soars

More foreign direct investment poured into the mainland last month, prompting an official warning on the need for tighter control on mergers and acquisitions.

Ministry of Commerce spokesman Yao Jian said yesterday that US$10.03 billion flowed into the country last month, 23.4 per cent more than a year ago. The manufacturing sector got most of the funds.

Anticipating more investment inflows, the ministry is now working on the details of a new regulatory blueprint to ensure foreign acquisitions of domestic firms do not affect national security and economic stability, he said.

Provisional rules introduced in 2006, targeting famous brand names and strategic sectors, carried stipulations on board control.

'M&A accounts for only 3 per cent of our foreign direct investments now, but this may grow by 8 per cent, 10 per cent in future,' Yao said. 'The rapidly growing trend means it is necessary to have a mechanism to scrutinise deals.'

Foreign direct investment in the mainland hit a record US$105 billion last year, but mergers and acquisitions accounted for only a small percentage compared with an average 70 per cent globally, he said.

Yao said M&A would be an efficient way to consolidate national industries. The latest rules will govern companies involved in defence, agriculture, energy, resources, infrastructure, transport, technology and equipment manufacturing.