Beijing to extend buyout controls

Guidelines aim to block foreign hostile takeovers, monopolies

Central government guidelines on foreign investment to be unveiled this year will include provisions to deter monopolies and hostile takeovers, according to a top official.

'The government needs to develop regulations to ensure the healthy development of mergers and acquisitions involving foreign parties, and to prevent foreign monopolies and hostile takeovers,' Li Zhiqun, director-general of the Ministry of Commerce's foreign investment administration department, said yesterday.

Briefing an online news conference on China's foreign investment policy, Mr Li said the government needed to maintain control of certain important industries and business sectors to ensure national economic security.

'China must promulgate at the earliest date regulations on foreign mergers and acquisitions to encourage fair competition, and to standardise and advance mergers and takeovers,' he said.

Mr Li said his ministry, together with other authorities, was accelerating the revision of investment guidelines for foreign direct investment and the government would make a series of policy adjustments on the issue this year to promote the quality of FDI.

But he also cautioned that such policy changes could affect foreign investment. 'Currently, our nation's work in attracting foreign investment faces many uncertainties because our policy adjustments in many areas will have a certain impact on it,' Mr Li said.

Since last year, a series of regulations tightening limits on certain kinds of foreign investment have sent a chill down the spines of foreign businesspeople.

In September, Beijing enacted new rules which, for the first time, banned foreign acquisitions and mergers that could be seen as endangering national economic security.

Calls for the government to tighten controls on foreign acquisitions of domestic enterprises have been mounting since last year. The debates on national economic security have effectively stalled the Carlyle Group's US$375 million acquisition of a stake in Xugong Group Construction Machinery's Shenzhen-listed subsidiary Xugong Science & Technology for more than 10 months.

Analysts say Beijing's tightening hold on FDI is a response to growing domestic fears that offshore takeovers will lead to the transfer of control of famous or time-honoured mainland brands. But overseas investors see the recent developments as new hurdles to foreign investment.

However, Mr Li said the government would welcome foreign investment in high technology, advanced manufacturing, 'modern' services, agriculture and environmental protection.

He said foreign mergers and takeovers of local companies had also brought China 'new opportunities', and would help the country improve industry and make better use of foreign investment.