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Commerce Officials Look to Safeguard Private Chinese Firms
Summary:

Cover story, issue no.412, March 30, 2009
Translated by Zhang Junting
Original article:
[Chinese]

The same day that China's Ministry of Commerce blocked Coca-Cola's purchase of Huiyuan Juice, officials there met with private sector leaders and discussed ways to protect Chinese industries--perhaps, from foreign acquisition.

The March 10 meeting was called by the Bureau of Industry Injury Investigation (BIII) of under the Ministry of Commerce, and included representatives from more than ten Chinese chambers of commerce.

During the meeting, officials with BIII proposed an "express channel" enabling private companies to quickly touch base with the government if their industry's health was in jeopardy, and other methods to safeguard China's private industries and maintain balanced development within them.

This was the first time that the Chinese government clearly proposed including private business into the concept of "industry safeguarding", and hinted that the impact of foreign acquisition on Chinese industry might be back on policymakers drawingboard.

The EO has learned that the Ministry was spearheading the issue at the behest of China's State Council, and that new regulations could come into effect within a few years, with the BIII already having begun research on an Industry Security Law.

The new regulations would scrutinize mergers or acquisitions in a broader context than the Anti-Monopoly Law, taking into account other links in the industrial chain, employment and social welfare, and key sectors of China's economy, including those in heavy industry, agriculture, and financial services.

According to the Ministry, foreign investors have shown growing interest in leading private Chinese companies, including in wind power generation, solar energy, agriculture, metallurgy and petro-chemicals.

But instead of direct merger or acquisition transactions, foreign firms were adopting more diverse methods of investment, such as private equity, capital injection, and technology investment, all of which China monitored weakly. Currently, only the State Administration of Foreign Exchange and China's customs officials could provide data on these transactions, and there was no concrete count of mergers and acquisitions.

It seemed that Chinese industry regulators feared a sudden loss of domestic private businesses to foreign firms, as the former were going through far more painful period than their state-owned counterparts during the economic slowdown. Chinese private firms lacked access to economic stimulus funds and were encountering stiff reluctance by most Chinese banks when seeking loans.

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