Merger and acquisition of foreign capital encountering the third threshold of joint deliberation and review mechanism

Shang foreign mergers and acquisitions into China's "security door" is speeding up construction.　　The newspaper learned that, following the recent release of the establishment of foreign investors in the merger and acquisition of domestic enterprises security Review System, the Ministry of Foreign Affairs of Mofcom is now further discussion on the implementation of the provisions of the operating rules and regulations.　　According to the current internal discussion on the rules, China is likely to set up an organization similar to the US Overseas Investment Committee (CFIUS), which will also be introduced as a national security review mechanism to manage the security of foreign mergers and acquisitions, according to people familiar with the business system. Under this mechanism, a security review body similar to the "Inter-Ministerial Joint Meeting" will be established, with the participation of a number of relevant ministerial bureaux of the State Department and some key industry associations.　　The implementation standards of the security Review mechanism will be based on the industry and the scale of funds as a double reference. "It is possible to list a strategic and sensitive industry. The list contains a lot of industries, and the division is very thin.　　"A person familiar with the discussions in the business system said that standards such as the industry area and the amount of money needed for a security review of mergers and acquisitions would be addressed in the implementation rules being worked out by the Ministry of Commerce." A number of ministries and commissions participated in the joint review it is understood that as early as the beginning of 2009, the National Security Review Mechanism programme has been basically completed.　　But as the international financial crisis erupted and the global economic situation was not clear, the plan was shelved. At the National Business Conference in January this year, Chen Deming, Minister of Commerce, referred to the "innovative use of foreign capital Management model", "the integration of foreign investment access management and operators concentrated antitrust review, foreign mergers and acquisitions security review organically, to protect domestic industrial security."　　"This is the first time the Ministry of Commerce to" protect the domestic industry security "into the annual report on the use of foreign investment in the part.　　According to the reporter understands, our country establishes the National Industrial Safety review Mechanism, will refer to the American method, the establishment all relevant departments participates in the foreign Capital Examination organization, according to our country situation to make the rule. According to the rules of foreign mergers and acquisitions system, the scope of security review includes: Foreign investors acquisition of domestic military and military supporting enterprises, key, sensitive military facilities surrounding enterprises, as well as other units related to national defense security; foreign investors acquire important agricultural products, important energy and resources, important infrastructure,　　Important transport services, key technologies, major equipment manufacturing and other enterprises, and the actual control may be obtained by foreign investors. "Unlike the concept of ' economic security ' widely used in the media in previous years, the two concepts of national security and defence security have been used. More specifically, 6 areas involving national security are specified.　　"Wang Zhile, director of the Beijing New Century Institute of transnational Corporations.　　He said that with more specific provisions, can prevent the general domain of the reorganization of mergers and acquisitions often rise to national security, confusing the interests of the game and national security relations. At present, the Ministry of Commerce within the rules of the implementation of the discussion. According to the business system people involved in the discussion, security review focused on "the lifeblood of the national economyIndustry and key areas ", including the Defense sensitive industrial sector (equipment class, strategic High-tech category), Basic and monopolistic industries (minerals, power grids, railways, telecommunications, utilities, logistics, agriculture, etc.); industry-leading or backbone enterprises (market share, technical brand importance); Background review of foreign investment (whether controlled by government)　　The possibility of the investment being monopolized in the domestic market, the harm to the local environmental ecology or the health of the residents.　　Under this mechanism, there will be a similar "inter-ministerial Joint Meeting" institutions-including the National Development and Reform Commission, ministries of Industry and Information Technology, Ministry of Commerce, Costind, science and technology, agriculture, SASAC, CBRC, state administration of Industry and General administration of taxation and some important trade associations will be included.　　Since the US Overseas Investment Commission's investigation is classified, it does not necessarily disclose the specific direction of its investigation to the companies concerned, nor can the respondents challenge the Committee's decision in court.　　It is not clear how the future Joint Committee review of our country will unfold, however, according to business system sources, it can be known that the security review and antitrust investigation will be independent of each other, the latter's review of foreign acquisitions is mainly focused on the impact of mergers and acquisitions on industrial competition, not national or industrial security.　　According to the relevant mechanism design, the Ministry of Commerce will be responsible for accepting the application of foreign-invested enterprises in the merger and acquisition of domestic enterprises, the Joint meeting of the Inter-Ministerial security review after receiving these applications, and to carry out the relevant review decisions.　　The industry faces some confusion after the publication of the provisions on the establishment of a security review system for foreign investors in the merger and acquisition of domestic enterprises. "How to distinguish between the merger control review in the Antimonopoly Act and the Security Review in the regulations is a question that needs to be clarified, because there is a possibility of two kinds of censorship in theory." Francois Renard, chairman of the EU Chamber of Commerce competition, said in an e-mail to our correspondent in February: In July 2009, the Ministry of Commerce amended the provisions on the acquisition of domestic enterprises by foreign investors, and deleted the fifth chapter of "Antitrust Review", and the relevant issues concerning the concentration of operators in reporting standards,　　It is based on China's anti-monopoly Law and the State Council's regulations on centralized reporting standards for operators.　　The provisions of this issue, but also proposed mergers and acquisitions security review.　　Wang Zhile, director of the Multinational Research Center at the Ministry of Commerce, explained: Regardless of foreign or domestic enterprises, there is the possibility of monopoly to disrupt the market order, even the state-owned enterprises, the government is likely to monopolize, "anti-monopoly law" to solve such problems, from the nature to the scope, and the provisions are different.　　In addition, according to our understanding, the future national security Review mechanism of the implementation of standards, will probably be the industry and capital scale for reference. "It is possible to list the strategic and sensitive industries, but because of the large differences between the industry, so how much to achieve the amount of market share of the need to be reviewed, can not generalize." "Knowledge of the above participation in the discussion of the rulesThe sentiment personage tells the reporter, this list according to the International Convention does not need to open externally, contains many professions to enter, simultaneously divides also very fine. However, this newspaper was informed that the fifth edition of the "Foreign Investment Industry Guidance catalogue", which is currently being revised, will have a certain relevance to the safety review list.　　The catalogue aims to further optimize the structure of foreign investment in China, which can be introduced as soon as this year. Among them, the industry of encouraging class mainly includes: New energy, material, biomedicine, high-end manufacturing, information industry and other fields.　　In addition, multinational companies are encouraged to set up research and development centers and extend industrial chains in China. In this regard, Francois Renard said, "since the publication of last June's draft on the establishment of a security review system for foreign investors in the merger and acquisition of domestic enterprises, many issues have been resolved, but the notice has raised some concerns, such as the broad definition of the industry." Another focus that surrounds the list is the amount of money that needs to be reviewed.　　According to people involved in the internal study, the relationship between the amount of mergers and national security, caused a lot of controversy. "Because the size of each industry is different, the characteristics are not the same, it is difficult to accurately determine the amount of a merger and acquisition of the impact on national security, and the situation is changed, but the standard is difficult to change with the industry changes."　　A person involved in the discussion told reporters.　　In addition, the stages of each industry are different. "In the early stages of the industry, the need for mergers and acquisitions, the integration of foreign investment in the entire industry, at this time should be encouraged, and in the development of the industry maturity, such as 3-5 companies accounted for the entire industry 70%-80%, should not be encouraged."　　"He Manqing, director of the Center for Transnational Economic Research at the Ministry of Commerce.　　And in accordance with the current provisions, 30 million yuan under the foreign mergers and acquisitions projects, approval authority has been decentralized to the local, the need for new provisions to include them in this mechanism.　　As a result, there is no clear agreement within the Ministry of Commerce on the extent of the amount of mergers and acquisitions that require security review. Foreign capital to fill 4 trillion of restructuring funds Gap 2003, foreign capital mergers and acquisitions in China once accounted for 5% of FDI investment. After that, with the multinational companies began to acquire strategic industries and industry leading enterprises, national economic security issues aroused concern.　　Since 2006, foreign consortia in the Chinese market mergers and acquisitions have encountered more and more resistance.　　The Global CEO survey, released in June, showed that only 24% per cent of the 1130 CEOs surveyed tended to adopt mergers and acquisitions in the Chinese market to achieve growth, IBM2008 said. According to Wang Zhile, compared with the global cross-border mergers and acquisitions, China's total foreign acquisitions are still relatively low. From 2004 to 2009, China's actual use of foreign capital of about 490 billion U.S. dollars, including the total amount of foreign mergers and acquisitions only 9 billion U.S. dollars. Foreign capital mergers and acquisitions accounted for less than 2% of total foreign investment.　　Far below the global average. "China's existing state-owned enterprises 40多万家, to achieve diversification of property rights structure, the reorganization of assets requires at least 40,000billion, such a huge funding gap, relying on domestic non-state-owned enterprises investment is obviously not satisfied, foreign mergers and acquisitions is a need to use the force.　　"He Manqing said.　　The domestic public opinion to the foreign capital merger concern, mainly points to two kinds of results: first, the foreign capital Merger and acquisition to eliminate the domestic competitor, obtains the domestic market share and even the monopoly as the goal; second, the foreign capital transforms the merger enterprise into its subordinate one "neither intellectual property, nor the core technology" processing　　Both of these possibilities will be included in the review of the security review system being built. After the completion of this system, foreign capital entering China will pass three threshold: first, the industry entry threshold under the catalogue of foreign investment industry guidance, and the other is the anti-monopoly law to examine the market concentration degree.　　Third, security review.　　Some professionals believe that with the continuous improvement of China's foreign mergers and acquisitions laws and the optimization of mergers and acquisitions environment, China will usher in a wave of cross-border mergers and acquisitions like the US in the the 1990s, becoming one of the largest mergers and acquisitions centres in Asia and even the world. "China's absorption of foreign investment in the 97% is to achieve the green space direct investment, mergers and acquisitions accounted for only 3%, perhaps in the future will be 8%, 10% of the speed of development, the Chinese market absorbing foreign acquisitions will be more and more." "Ministry of Commerce spokesman Yao Jian said on February 17.