However, second-half figures are likely to be boosted by recent huge deals by foreign companies in Chinese lenders China's mergers and acquisitions transactions fell for the first time in recent years in the first six months of this year, according to PricewaterhouseCoopers. Total disclosed value of completed deals fell 5 per cent year on year to US$26.2 billion, the accounting and advisory firm quoted M&A Asia's figures. China ranked first in Asia by number of deals - despite a 14.4 per cent year-on-year drop to 302 - but third by deal value after Australia and Japan. Beijing's implementation of two regulations restricting management buyouts of large state firms and domestic residents from setting up and holding shares in offshore firms had slowed deal flows in the first half, said PwC partner Graham Matthews. 'However, we believe that as the market adjusts to these new rules, a backlog of deals will flow through,' he said. 'China is still one of the fastest-growing economies in the world and there is a great appetite to do deals.' A pickup in activities was expected as the government's move to make previously non-tradable state shares tradable would spur more mergers and acquisitions since it gave government entities greater flexibility in relinquishing shareholding control. Recent large acquisition deals in the financial sector would also boost second-half figures. They include Bank of America and Singapore government-backed Temasek Holdings' US$3.9 billion investment in China Construction Bank, and Royal Bank of Scotland Group, the Li Ka-shing Foundation and Merrill Lynch's US$3.1 billion yuan stake acquisition in Bank of China. In January and April, the State Administration of Foreign Exchange issued separate circulars which made it more difficult for mainland residents to hold shares in overseas companies. 'The original intent of this is to prevent conflict of interest of state firms' management,' said PwC partner Christopher Chan. 'This happens when management of the mainland firms are given shares of a foreign firm as these firms set up operations or close deals abroad.' This gives rise to conflicts of the managers' own interest with that of the state. Intermediaries such as bankers and lawyers are lobbying the government to relax the restrictions. Mr Chan believed the government was unlikely to change the regulations but intermediaries could think of ways to give state firm managers incentives in the form of bonuses instead of shares. In April, the State-owned Assets Supervision and Administration Commission and the Ministry of Finance prohibited management buyouts of state firms with less than 2,000 workers, annual sales of less than 300 million yuan and assets of less than 400 million yuan. The move was aimed at preventing sale of state assets to the private sector at below-market prices. Mr Chan expected more liberalisation in foreign shareholding in the distribution and retail sectors would fuel investment going forward.