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  3. Takeover hostility Acquisitions of Chinese enterprises by foreign companies are increasingly being challenged amidst a growi

Takeover hostility Acquisitions of Chinese enterprises by foreign companies are increasingly being challenged amidst a growi

admin2013-01-20  78
问题                                      Takeover hostility
    Acquisitions of Chinese enterprises by foreign companies are increasingly being challenged amidst a growing mood of "economic patriotism."
    The former National Bureau of Statistics Commissioner Li Deshui is one of the most prominent of the critics. During last month’s session of the National People’s Congress(NPC. the country’s law-making body, he warned that the acquisition of promising local companies by multinational investors was creating monopolies in a number of sectors.
    "If China lets multinationals’ malicious mergers and acquisitions go ahead freely, China can only act as labor in the global supply chain," said Li, worrying that Chinese brands and the innovation ability of the national industry would disappear gradually and core parts, key technologies and high value added of China’s leading enterprises might be completely controlled by multinationals."
    His pointed criticism generated wide media exposure and created fears of a foreign mergers and acquisitions(M&A) threat.
    Several factors have contributed to the climate, including national pride, lingering resentment over Chinese oil giant CNOOC’s failed US $18 billion bid for Unocal last year, and a protectionist resurgence, partly in response to a growing protectionist sentiment in the United States and Europe against low-cost Chinese exporters.
    "These emotions about foreign capital are the last thing we want," says Fei Guoping, director of the China Mergers & Acquisitions Association under the All-China Federation of Industry and Commerce.
    "Such unwarranted enthusiasm will only hurt the country’s economic development. What we want is to make sane progress in building an M&A review system based on national economic security," says Fei, who is the chief writer of a proposal on such a review system submitted by the federation to the NPC last month.
    While the Chinese Government welcomes foreign investment, through M&As or otherwise, the explosive increase in FDI has given multinationals a degree of market power that many Chinese find worrying and potentially damaging to the development of domestic enterprises.
    However, if the worry is directed at the scale of foreign investment, it is missing the target, says Fei, who believes the key point is the absence of a law and a government body to look at possible M&As that may hurt national security.
    In China, some department regulations involve M&A reviews and several government bodies have the power to look at parts of the M&A cases.
    The Ministry of Commerce(MOFCOM)) and the National Development and Reform Commission(NDRC) are entrusted with the primary responsibility of supervising foreign-related M&A transactions. The former is the principal foreign investment regulator while the latter is responsible for approving the foreign investment project application.
    The nature of the target may lead to the involvement of other regulators. The State-Owned Assets Supervision and Administration Commission plays a significant role in transactions involving State-owned enterprises. The China Securities Regulatory Commission, which is responsible for monitoring and regulating China’s capital markets, will be involved in transactions linked to listed companies.
    There is a higher level of government participation in M&As in China than is typical in other countries, says an official from skincare company L’Oreal, which acquired local brand Mininurse.
    "Despite the recent relaxation of foreign investment restrictions, pervasive approval requirements re- main a distinctive feature of M&A transactions in China," says the official, who did not want to be named.
    While the complicated M&A review process often scares away potential investors, few efforts are made during the process to check whether a monopoly is created or whether the deal threatens national security, Fei says.
    "The establishment of an M&A review system and an authority will be a base line, though it may not be frequently used."
    The US practice is one way to go. The Exon-Florio Amendment was enacted in 1988 amid rising domestic concern about growing Japanese investment in America. It authorizes the president to block any foreign acquisition of a US company that threatens to impair national security based on recommendations of the Committee on Foreign Investment in the United States(CFIUS). CFIUS is chaired by the US Treasury but includes 12 federal agencies with defence, security, and economic interests.
    However, CFIUS rarely blocks agreements. It has reviewed more than 1,500 transactions since 1988 but blocked only one-the proposed 1990 acquisition of a US aerospace company by China National Aero-Technology Import & Export Corporation.
    National security should be clearly defined to build such a system, says Wang Zhile, a researcher at the Chinese Academy of International Trade and Economic Co-operation.
    "National security is not a volatile feeling that can be frequently mentioned," says Wang, a researcher on multinational operations in China.
    Li Deshui claimed that by 2005, multinationals controlled more than 80 percent of China’s large scale supermarkets, with foreign companies also enjoying virtual monopolies in other categories such as skincare.
    However, foreign retailers actually account for less than 10 percent of the country’s retail sales.
    It is also frequently cited as proof of a foreign monopoly threat that most of the 2,000 enterprises in the equipment-making industry with more than 100 billion yuan(US $12 billion) in annual sales are foreign-funded.
    In reality, it means that the market is fully competitive, and is not a threat to national economic security, says Wang.
    "Simply making it harder for foreign investors does net solve the problem; it only makes matters worse."
    Compared with other regions around the world, the M&A wave in China has not yet reached its peak and has been picking up only in recent years with the easing of restrictions.
    The total volume of Asia-Pacific M&As last year hit a record US $474.3 billion, up 46 percent from US $324.5 billion in 2004. China leads the race as the most targeted country outside Japan, recording a total US $66 billion in announced deals in 2005, compared to US $58.9 billion in 2004, according to market data firm Dealogic.
    At the same time, MOFCOM data shows that foreign greenfield investment last year fell 0.5 percent to US $60.33 billion.
    Many foreign investors now prefer acquisitions of Chinese enterprises rather than greenfield investments, because it saves time for those eager to gain a foothold in the country, Wang says.
    Investment bankers warn that the current negative sentiment could reduce overseas companies and buyout groups’ appetite for takeovers. Carlyle Group’s landmark 3 billion yuan(US $370 million) take-over of Xugong Group, China’s largest construction equipment maker, has been stalled.
    People familiar with the situation say MOFCOM is refusing to approve the deal—the country’s largest private equity buyout—unless Carlyle promises not to sell its majority stake to a foreign construction-equipment group in the future.
    It remains to be seen whether the tougher conditions being imposed on foreign investors will result in longer-term restrictions on foreign takeovers of Chinese companies and the creation of an anti-trust regime that is aimed at foreigners, according to an analysis by PricewaterhouseCoopers.
    Carlyle’s problems are matched by similar delays for Caterpillar, the world’s largest construction-equipment company, in its efforts to buy into Xiamen Engineering Machinery. The company has already purchased Shandong Engineering Machinery Corp.
    James Owens, chairman and chief executive officer of Caterpillar, says he is amused that people think Caterpillar is seeking a monopoly.
    "Our market share in China is less than 5 percent, lower than any other country in Southeast Asia."
    Owens says he expects the company’s sales to more than double in the next five years as China continues to build expressways and subways.
    But the expectation is based on its current expansion plan in China, which hinges on a mix of joint ventures, wholly-owned enterprises and acquisitions, a strategy under threat in the present climate.
选项 A、Y
B、N
C、NG
答案A
解析 可根据他的谈话内容来判断，如果China lets multinationals’ malicious mergers and acquisitions go ahead freely，结果将是China can only act as labor in the global supply chain。
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