Financeasia.com, a Hong Kong-based regional websites for Asia's institutional investors has recently run a lengthy commentary, praising China's continuous efforts. The commentary was written by Thomas Ng, a managing associate of the China Group at law firm Linklaters and formerly advisor to Citibank in its acquisition of shares of Shanghai Pudong Development Bank.

Ng said that some of the more recent laws passed by the Chinese government over the past 12 months have been driven by "the authorities' desire to deepen economic reform...and create an even more attractive environment for foreign investment."

"Soon after accession, China undertook the mammoth task of updating its merger and acquisition (M&A) regulations to make them consistent with WTO obligations," he said.

With the recent introduction of the Take Over and Disclosure Procedures, which set out a regime governing the acquisition of a substantial or controlling stake in Chinese listed companies and the associated disclosure requirements, China has taken a big step in bringing its regulatory M&A framework closer to the international norm, the commentary said.

"In line with international financial market expectations, the emphasis is on disclosure, both from the perspective of the party acquiring and the one being acquired," he said.

China's new M&A regulations have generated considerable interest amongst the international investment community and with them, present significant new opportunities to foreign investors, he said.

One of the more significant changes is a lifting of the prohibition against the transfer of state-owned shares of China's listed companies to foreign investors, he said.

"In fact, some of last year's most high-profile deals in China -including Citibank's purchase of a 5 percent equity stake in Shanghai Pudong Development Bank - would not have been possible without these new regulations," he said.

Whilst we expect a substantial amount of M&A activities will continue to take place offshore through sales of special purpose vehicles, the number of international M&A transactions effected onshore is likely to increase significantly in the coming years, he said.

The Chinese government's desire to use foreign investment to fund state-owned enterprises and the preference of multinational corporations buying into existing businesses over launching their own start-ups in what are already competitive markets, will clearly be drivers for onshore transactions, Ng said.

(Xinhua News Agency February 10, 2003)