Since China’s accession to the World Trade Organization (WTO) in 2002, China has seen a rapid increase in the volume of inbound M&A consummated by foreign investors. What follows is a high-level overview of the primary issues for foreign investors to consider when contemplating inbound M&A transactions in mainland China. These issues are: (I) market entry; (II) players; (III) regulatory approval and examination process; (IV) defenses to a hostile takeover and (V) other special issues (foreign exchange control and local law and governmental requirements).
I. Market Entry -
Market entry should be the starting point for a foreign investor contemplating an M&A transaction in China. After China acceded to the WTO, the government substantially revised a policy regarding foreign investment in China, opening certain industries to foreign investors and restricting or prohibiting foreign investment in other industries, in line with its WTO commitments. The policy is updated every three or four years. There is no single concern that determines which industries are open and which are restricted or prohibited; rather, a host of issues specific to each industry are considered. This policy applies to all foreign investment and does not permit case-by-case analysis.
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