China pledges better M&A environment

China on March 24 made it easier for its companies to carry out cross-border mergers and acquisitions, senior officials said.

Pledges were made to increase multinational companies' access to government initiatives to ease overcapacity and improve China's industrial structure.

The State Council issued a notice to cut administration procedures and barriers for mergers and reorganizations. It will also improve services related to finance, tax, land use and employee relocation while helping to ease overcapacity and enhancing the industrial structure.

"China encourages cross-border mergers and acquisitions for enterprises to allocate resources in global markets and will improve related policies," the notice said.

China welcomes the participation of overseas companies in the government's move to ease overcapacity, Su Bo, vice minister of Industry and Information Technology, told a forum on March 24.

"China's overcapacity provides new scope for foreign companies to deepen their investment in China," Su said.

"We welcome their engagement and will loosen restrictions on market access. We expect cooperation between foreign and local companies to upgrade products while supporting foreign companies' moves to establish research and development centers in China. We will forge a long-term strategy for opening-up and development."

Moves to boost overseas mergers and acquisitions and welcome cross-border participation to ease overcapacity will help China improve industrial competitiveness, says Wang Zhongxian, a researcher at the Development Research Center of the State Council.

"China's overseas mergers and acquisitions will shift some low-end productivity from home to abroad as well as gain advanced upper-end technology, research and development," Wang says.

"The introduction of foreign companies will improve industrial competitiveness."

Zhu Hongren, chief engineer of the Ministry of Industry and Information Technology, says that compared with earlier attempts to boost mergers and reorganizations, enterprises will play the primary role while the government will create a favorable environment.

"Mergers and reorganizations are the business of enterprises while the government is mainly responsible for building a fair and level playing field.

"While improving the policy environment, the government should also provide public services and strengthen supervision."

He says the central government will remove barriers to mergers and acquisitions across regions and, unless clearly prohibited, encourage private capital into certain sectors and areas. State-owned capital is urged to invest in key areas and sectors related to the nation's security and economy.

Commercial banks will be guided to provide loans for mergers and acquisitions as long as risk is under control. Companies will also be allowed to use vehicles such as stocks, short-term financing bills and medium-term notes to raise capital for mergers and acquisitions.

lijiabao@chinadaily.com.cn

(China Daily Africa Weekly 03/28/2014 page23)