China opens up its M&A market wider to overseas investors

cctv.com 11-19-2003 09:37

In today' s policy update, China says that there is no minimum price to transfer the State-owned assets and non-performing loans to foreign investors. Chinese minister in charge of the State-owned Assets Supervision and Administration Commission, Li Rongrong, says the purpose of the growing push towards mergers and acquisitions is to better allocate resources and improve profitability. The price of the transferred State assets should be decided by the market. Experts point out that with the acceleration of China鈥檚 integration with the world economy in the financial sector, China is becoming a new growing market for international mergers and acquisitions.

At a press conference this week, the minister said the state control of the economic sector will gradually reduce with a growing trend of mergers and acquisitions involving overseas investors. However, he says irregularities do exist, such as selling State assets at much lower prices in behind-the-scene deals. The role of his commission is to formulate more standards and rules to ensure transparency, fairness and equity in the transactions.

Wang Xiaoguang, Research Fellow of Economic Research Center, SDRC, said, "The development trend in the industrial sector is to upgrade, from labor-intensive to medium-level manufacturing or some kind of capital intensive and technology-intensive industries. During the process of transition, a lot of assets are declared "dead assets", for existing irregularities. Now we are speeding up the reform, using the method of mergers and acquisitions, especially the international M&A, which could help us, invigorate those assets. "

This year, the commission has been working on 13 administrative regulations, which cover authorized management of State-owned assets, property-right disputes and evaluation of corporate performance. Another 15 regulations will be drafted in the coming year. The market of mergers and acquisitions in China still has a high potential for growth. However, so far that only accounts for about five percent of overseas investment in the country.

Wang also said, "Our country is attaching importance to the role of overseas capital in invigorating the assets, but the method of asset sale is different this time. Instead of government deciding all aspects of the sale, the assets restructuring and pricing now will be done according to market conditions, that is, the market will determine the price. The price can't be set by any person. It is not the right way to price the assets very freely. The value of the assets should be based on the assessment made by seller and buyer. I believe the next step in assets restructuring is a market-oriented move, which is a good opportunity for overseas investors and also a system of protecting their profits. "

According to the latest official statistics, from April to September this year, the central State assets supervisory body approved the property right and asset transfers of 48 State-owned enterprises, involving some 2.7 billion US dollars. Among the transfers of large SOEs directly supervised by the central government, as much as 83 percent of the assets were transferred to domestic private firms and overseas investors.

Editor:Zhang  Source:CCTV.com