International Law

China's "New" M & A Review System. Just Chill.

By Dan

Last week, China came out with some guidance as to how it is going to determine whether foriegn company acquisitions (M&A) endanger China's national security and there have already been all sorts of articles speculating that this is going to mean a real crackdown on foreign acquisitions. I was going to wait a few weeks to write on this, but since Stan Abrams over at China Hearsay just did such a nice job covering it, I am going to write on it now.

I like Stan's view of it because it comports with mine. In his post, entitled, "Reciprocity and Slippery Slopes: China's New M&A Review System," Stan tells everyone to relax. I could not agree more.

Stan bases his advice on the following:

1. China's laws often start out with little detail and then it "sometimes it takes years before additional guidance (e.g. from the Supreme Court) or simply a track record of judicial action lets us know how a new law is going to be enforced. In other words, let's not get too excited about the broad language in the scope of this review body just yet."   

2. "Beijing has always been big on reciprocity. If a foreign government does something to China, or Chinese companies, there is a good chance that Beijing will strike back in some way. We've seen this with trade and investment matters, visa procedures, etc. To some extent, this national security review is a reaction to similar bodies abroad that have hindered efforts of Chinese companies to engage in offshore acquisitions." China is likely to treat companies from other countries similarly to how those countries treat companies from China. 

3. China already has plenty of ways it can block deals so there is no reason to think it has added this national security review simply to do so.  

Agreed.

By the way, if you are not reading China Hearsay, you should be. There used to be a number of excellent China law blogs out there, but with the exception of China Hearsay, few if any of those post wtih any real regularity. It really is pretty much just us two now and so if you read us, I urge you to read China Hearsay as well. Stan's blog is generally more analytical and less nuts and bolts than this one, which is all the more reason to read us both.   

Full post as published by China Law Blog on February 15, 2011 (boomark / email).