Research On The Regulation Of Foreign Investors' M&A In China

Foreign Investors' M&A in China will replace the Greenfield investments to become the main form of making use of FDI. With the evolution of Foreign Investors' M&A in China, Foreign Investors' M&A has lots of new characteristics. While Foreign Investors' M&A has a positive effect on Chinese economy, it also causes the performance losses and distortion in some aspect, In addition, there are some kinds of institutional defects in current regulation of Foreign Investors' M&A, the regulation is not able to achieve objectives of effective allocation of resources. Based on above analyses , this paper is aimed at researching on the regulation of foreign Investors' M&A in China, and also suggests to construct the regulation objectives and design the system of Foreign Investors' M&A based on efficiency improvement.Firstly, this paper systematically analyses the evolution pattern and behavioral characteristic of Foreign Investors' M&A in China. The findings of the research indicates that in different stages, Foreign Investors' M&A in China has different characteristics in different aspects such as the origin composition, pattern, industries of M&A, target enterprises, regional distribution, etc. and focuses on revealing the characteristics such as the trend of demanding conditions in Foreign Investors' M&A, and the increasingly strong requirement to control the target enterprises etc. This paper shows the general picture of Foreign Investors' M&A in China .Secondly, the paper analyzes the key factors which influence Foreign Investors' M&A in China. Based on the qualitative and quantitative analysis, the paper analyses three influencing factors such as motives of Investors' M&A, China's macro-economic environment, institutional factor. Carrying on the regression analysis with logistic model, the conclusion is that the purpose of Foreign Investors' M&A in China has changed, which is not for low-priced labor force and achievement shared in stockholding way, but for realization of company's intention of global strategic layout to pursue industry integration,resource controls,monopoly status and the eradication of potential competitors, etc. China's positive macroeconomic environment and the increasing liberalization have provided a broad market space for Foreign Investors' M&A in China. Along with the principle of national treatment moving forward, encouraging preferential policies will lose its effectiveness . The traditional industrial policy which relies on industrial control should be replaced by competition policy which depends on the adjustment of market mechanism as the core of investors' M&A regulation.Thirdly, the paper analyzes the effects caused by Foreign Investors' M&A in China. The findings of the research indicates that Foreign Investors' M&A in China has provided technology and advanced management experience for China's economic development, has made a significant contribution to the industrial structure's upgrading and economic growth. Because of the nature of pursuing monopoly of transnational corporations, and the institutional defects of China's Foreign Investors' M&A, Foreign Investors' M&A also brings about loss and distortion of performance, and other negative effects. These problems includes the loss of state assets, crucial technology controlling and brand draining. One of the biggest negative effects is monopoly and the related threat caused by industrial controlling. Once the foreign investments control the market, they may manipulate the market and price, suppress competition and reduce market efficiency, distort the market structure. This kind of monopoly often appears in the form of controlling the host country market of foreign capital, thereby undermining its formal competition order, affecting the independence of national industries. The performance may also control the economic lifeline of host country, thereby threatening the country's economic security. The comprehensive analysis on the achievement of Foreign Investors' M&A, provides the realistic basis for regulating Foreign Investors' M&A in China.Fourthly, based on analysing above-mentioned problems, this paper inquires into the existing regulation of Foreign Investors' M&A. So far, as the main part of regulation of Foreign Investors' M&A, Chinese government has promulgated amount of policy, laws and regulations to standardize the activities of Foreign Investors' M&A in China, to provide institutional protection for the development of Foreign Investors' M&A. However, because of the institutional defects such as dislocation of host auxiliary relations in the existing regulation of Foreign Investors' M&A, consisting mainly to industrial policy supplemented by policy, some problems such as discriminatory treatment, the lack of a comprehensive legislative system of Foreign Investors' M&A, all these have restricted the development of Foreign Investors' M&A, but also made the existing regulation of Foreign Investors' M&A not able to inhibit or eliminate the negative impact of Foreign Investors' M&A, not able to achieve the objectives to optimize the allocation of resources. There are some institutional defects in the present regulation of Foreign Investors' M&A, the defects are the internal driving force for system vicissituding.Finally, based on the analysis on existing problems of Foreign Investors' M&A and institutional defects of regulation, on the basis of the experience of foreign transnational regulation, and following the principle of efficiency and national sovereignty defence, this paper combines the virtue of both Harvard school and Chicago school, uses the model of the behaviorism and Structuralism, gives the first place to the behaviorism as the care of the consideration of exception and rationale. Making the transformation from the industry policy to the competition policy, the industry policy consists mainly to the regulation of industry access as the core, the competition policy consists mainly to the anti-monopoly as the core. Changes should be made from being advantageous in industry controlling to being advantageous in competition, the economic efficiency improvement and the international competitiveness. On the basis of efficiency improvement, the government should make the institutional arrangement of regulation of Foreign Investors' M&A including relaxing industry regulation, enhancing competition regulation and actively participating in the international coordination, in order to realize the regulation goal of Foreign Investors' M&A.To sum up, this paper has made a researching on the regulation of foreign Investors' M & A in China comprehensively. The basic conclusion is that, along with the development of Foreign Investors' M&A, there are some new features which invalidate allocation of resources and social welfare and efficiency. There are some institutional defects in the existing system of Foreign Investors' M&A, not able to regulate the behavior of Foreign Investors' M&A effectively, to achieve objectives of effective allocation of resources. Based on that, Chinese government will fulfill the functions of political organizations, focus on institutional arrangements, the establishment of a fair market order, against monopoly, and safeguard national economic security. Series of laws and regulation policy should be made to regulate Foreign Investors' M&A,in order to achieve the regulation objectives of Foreign Investors' M&A based on efficiency improvement. Constructing the regulation objectives and system designing of Foreign Investors' M&A based on efficiency improvement are the end-result of this paper and main purposes.