On Mergers And Acquisitions In China's Economic Transition

Mergers and Acquisitions of enterprises (M&A) is an economic activity of acquiring the holding share of other enterprises through the trade of property rights under the market economy. M&A is an inevitable product in the development of market economy. Since the end of 19th century, the world has witnessed five large-scale merger surges. In the aspects of the number and trading amount, the fifth M&A surge, which happened from the late 20th century, has reached the summit in the human history. In the year of 2000, the total M&A amount was US$ 3.4 hundred million, in which the trading amount of international M&A reached US$1.1 hundred million, ten times that of 1990. With the development of the world's economy, the intensifying of market competition and deepening of the economic globalization, M&A has become a vital part of the global economy.With economic restructuring and social development, M&A has been more frequent and the scale has become larger. In 2002, the trading amount of M&A totaled US$29 billion, doubled that of 2001. And in 2003, it still kept a constant growth momentum. For China, M&A is still a rather fresh economic activity with three major characteristics.M&A in China is conducted under the specific situation of economic transition from a planned economy to a market economy. The essence of the transition is to deal properly with the relations between macroscopic and microscopic interests, to establish a perfect constitutional environment and a market system, and to make market mechanism a major means of resources disposition. In the process of economic transition, there spring up several problems such as the reform of state-owned enterprises, optimization of resources disposition, economic restructuring and shift in governmental functions. Therefore, M&A has become an important means to solve these problems. However, a relatively perfect market system for M&A has not been formed in China.M&A in China sprouts and develops under the condition of open economy. Along with China's entry into WTO, it integrates into the global economic system gradually and is now developing at an even faster speed. With its relatively low productivity and severe shortage of capital, China has no choice but to adopt the policies of opening to the outside world to attract productive factors such as capital, technology and talents. As a result, it is inevitable that many M&A activities take place between and among Chinese enterprises and foreign enterprises. Hence, a large number of M&A activitiesABSTRACTare driven by the outside force.Financial and Banks reform is one of the driving forces of M&A activities in China. In the meantime, the imbalance of reform makes M&A activities unable to reach an optimum state. The development of stock market in China is one of the basic conditions of M&A. And these activities conducted between and among listed companies have become the main stream. However, the deficiencies in the development of financial intermediary organizations and bond market have restrained the ongoing of M&A in China.Domestic studies on M&A are mainly from two angles. One is from the interests of the parties concerned. It explores the influence of M&A on the governing structure and development of enterprises and the guidance and policies made by the government. It also explores how the creditors such as commercial banks and asset management companies make better use of their assets through acquisition and reshuffle. The other one is to research on the M&A operations conducted among listed companies and their performance, etc. The main purpose of the research is to test the effectiveness of M&A in China and try to find existing problems and ways to solve them.All concerning parties, including the government, enterprises, banks and investors should keep on studying on some issues to reach common grounds so as to promote the healthy development of M&A in China.1. What are the motives of M&A? It is not simple overlay of scale, but reallocation and optimization of resources and productive factors. Its es...