China should accelerate its improvement of laws and regulations on mergers and acquisitions of domestic companies by foreign capitals, which, if not cautiously handled, might jeopardize the nation's industry security, some lawmakers said ahead of the top legislature's annual session.

The country needs improved regulations and laws to guide and manage foreign mergers and acquisitions to ward off monopoly by overseas companies and ensure national industry's security, said Ma Jinquan, a deputy to the National People's Congress (NPC), China's top legislature, which will open its annual full session on Monday.

Ma, a director of the Anshan Iron and Steel Group Corporation in northeast Liaoning Province, suggested the country enact such regulations as early as possible to encourage fair competition, standardize mergers and prevent industry monopoly.

Citing Xugong Group Construction Machinery as an example, NPC deputy Qin Chijiang said it is very short-sighted for some local companies to sell their brands with a hard-won fame to foreign companies for capitals.

The country's largest construction machinery manufacturer and distributor agreed last year to sell 85-percent of its shares to global private equity firm Carlyle Group.

"Xugong made a historical mistake," Qin, secretary-general of the China Society for Finance and Banking, said.

"If they need capitals, why not turn to domestic channels? Either private funds or national finance should be available," Qin said.

China has beaten other developing countries to become the most favorite destination for overseas capital, also resulting in an emerging trend of foreign mergers and acquisitions in the country in recent years. Currently, foreign capitals mainly focus on energy sources, machinery manufacturing, food and consumer goods, commerce and financial service for mergers.

However, rising with the merger trend are concerns over the loss of state assets and the security of national industry.

A Ministry of Commerce official said the ministry is trying to balance the protection of indigenous industries and the investment enthusiasm of foreign companies.

"Foreign mergers and acquisitions should be conducive to the country's economic development and industrial rejuvenation. Relevant departments should have a rational judgment," said NPC deputy Guo Xiangdong.

Foreign direct investment used in China topped US$69.47 billion last year, bringing the total foreign investment used to US$685.4 billion.

The country so far has more than 590,000 foreign-invested companies with 41,485 newly established last year, official data revealed.

(Xinhua News Agency March 4, 2007)