Research On Foreign Capital M&A And Chinese Industry Security

Since the mid 1990's, with the development of economic globalization, the fifth Mergers and Acquisitions (M&A) wave has been raised in developed countries and gradually spread to developing countries. In the fifth M&A wave, the quantity and proportion of cross-border M&A increased rapidly and it has become the main style of foreign directly investment nowadays. The international experience of cross-border M&A waves showed that, foreign investors merged and acquired host countries industries (namely foreign capital M&A) that would affect host countries from two aspects as follows: firstly, promote host countries economy growth, capital introduction, technical progress and employment enlargement; secondly, bring significant influence to the survival and development of each country national industries. Therefore, foreign capital M&A became to be one of the important factors to influence industry security in various countries.Since the reform and opening up, Greenfield Investment was used as the main foreign investment way in China, which constantly kept with coming out top worldwide and the first among developing countries in absorbing foreign capital. And the proportion of foreign capital M&A was always low. Under the background of China entered into WTO in 2001, the laws about foreign capital M&A have become better and economy growth has been in a high speed. Large quantities of foreign investors, such as the multinational corporation, private equity fund and so on, began to be active. The quantity and the referred industries of their activities of M&A increased rapidly. And they merged the main enterprises and well known brands in these industries, such as automobile, soy bean, domestic chemical, equipment manufacturing, medicine, circulation, finance and so on. And some industries even were merged by foreign capital totally. In the context, whether foreign capital M&A to threaten Chinese industry security or not was hotly discussed in all social circles. How to understand the impact of foreign capital M&A to Chinese industry security became an important issue, which was paid wide attention by theoretical circles and the relevant section of government.Under the background, the study was instructed by Marxist dialectical materialism and adhered to the combination of theory and practice. The methods, for the example of normative research, empirical research, total analysis, case analysis, qualitative analysis and quantitative analysis were combined with. Based on the international experience, modern economic theories such as industry security theory, industry organization theory, foreign capital M&A theory, industry competitive power theory and institution economics theory and the economic research measures such as statistics and game theory were utilized to analyze the impact of foreign capital M&A to Chinese industry security comprehensively. And the research attained certain conclusions which were of theoretical and actual meaning. The contents and conclusions were contained in seven chapters as follows:The first chapter was introduction, which described the background and the meaning of the research. It also introduced the study framework, research methods, the main innovations and defects.The chapter 2 was the correlative theories on foreign capital M&A and industrial security, which reviewed and summarized the theories of foreign capital M&A and industry security comprehensively. And it laid massy foundation to analyze the impact of foreign capital M&A to Chinese industry security. The theoretical analysis to the impact of foreign capital M&A to Chinese industry security was carried out and proposed the influence process, evaluation standard and indicators. The analysis framework and methods to research the impact of foreign capital M&A to industry security were formed naturally.The chapter 3 analyzed the impact of foreign capital M&A to Chinese industry control power. On the basis of reviewing the development of Chinese foreign capital M&A, from the perspectives of foreign capital shareholding rate, brand controlling rate, technique controlling rate, market controlling rate and cross-border M&A intersection indicator, the impact degree of foreign capital M&A to Chinese industry control power was analyzed. It showed that foreign capital M&A brought significant threat to Chinese industry control power in on-limits industries. Meanwhile, because of foreign capital M&A political limitation in Chinese strategy industries, foreign capital only could threaten Chinese strategy industries a little. Then, the mechanism of foreign capital M&A threatening Chinese industry control power was analyzed, and it showed the main reason of Chinese industry weak competitive power was the threat of foreign capital M&A to Chinese industry control power. Finally, taking Chinese soy been industry for example, the threat of foreign capital M&A to industry control power and the hazard of foreign capital M&A to national economy security was analyzed carefully.The forth chapter discussed the impact of foreign capital M&A to Chinese industry competitive power. Firstly, Port-Dunning Diamond Model was utilized to carry out general analysis on the impact of foreign capital M&A to the various factors of Chinese industry competitive power. And the results showed that, there was positive and negative impact. The stock-holding degree and monopolizing degree of foreign capital M&A to nationality enterprises were higher, that would cause more factor loss of nationality industry competitive power. Under the circumstances of foreign capital non-stock-holding and non- monopoly, foreign capital M&A could improve nationality industry competitive power. Secondly, factor analysis was utilized to analyze the impact of foreign capital M&A to Chinese listed companies' competitive power and attained some referential meaning conclusions as follows: the ability of foreign capital M&A to increase Chinese listed companies' competitive power was positive related to foreign capital companies' strength, the investment proportion of foreign capital and whether foreign capital to be the first majority shareholder or not significantly. However, foreign capital M&A could increase listed companies' competitive power significantly in light of long-term tendencies. Therefore, at the same time of keeping national enterprises holding position, attracting powerful foreign capital company participation and giving them comparative more equity stake could raise national enterprise competitive power and ensure industry security. Finally, based on the case of Chinese automobile industry, impact and its main patterns of foreign capital M&A to Chinese industry security competitive power. And it showed that, in the context of that Chinese automobile industry permitted foreign capital M&A properly, transferring and overflowing technique increase Chinese automobile industry competitive power significantly after foreign capital M&A.The chapter 5 was mainly about the impact evaluation of foreign capital M&A to Chinese industry security and its international comparison. Firstly, the current impact situation of foreign capital M&A to Chinese industry security was evaluated comprehensively. On the basis of summarizing the condition of foreign capital M&A to industry control power and to industry competitive power, the impact of foreign capital M&A to Chinese certain sectors industry security was evaluated scientifically. Secondly, Double Diamond Model was used as theoretical tool to analyze Chinese industry security tendencies at the background of foreign capital M&A. The work above showed that, because of economic globalization bringing China "Two Types Markets and Two Types Resource", the dependency of Chinese nationality industries to foreign capital M&A decreased and Chinese industry security would improve further. Finally, by comparing the impact of foreign capital M&A to various countries industry security, the research found that cross-border M&A wave in European and American countries was of intersection M&A characteristic, which was favor of improving international competitive power of these multinational corporations. Because of strict limitation to foreign capital M&A within economy development, Japan attained good industry security effect. However, because Latin American and Eastern European countries encouraged foreign capital M&A excessively, make these countries industry security and economy security be damaged seriously. By comparing these countries above, a conclusion was arrived at as follows: the impact of Chinese foreign capital M&A to industry security was basically appropriate.The policy suggestions to perfect Chinese foreign capital M&A policy and to maintain industry security were proposed in chapter 6. The experiences to supervise and control foreign capital M&A from developed countries such as the USA, Japan, Canada and European Union, were summed up comprehensively. Then, the general framework to control foreign capital M&A and to maintain Chinese industry security was proposed. Further, strengthening foreign capital M&A control to maintain Chinese industry security should build and perfect Anti-monopoly system, national security system, industry policy system, modern capital market system and marketing economic system and so on.The seventh chapter was the conclusion and the outlook of the research. The main study conclusion were summarized and it had an outlook about how to perfect the research to the impact of foreign capital M&A to Chinese industry security.According to the research, the main conclusions were as follows: firstly, in the context of indulging foreign capital M&A, both Chinese industry control power and industry competitive power would be damaged badly. Further, the degree of Chinese industry security decreased seriously. Secondly, if foreign capital M&A was permitted appropriately, it would increase Chinese national industry competitive power, and it would help to increase Chinese industry security to some degree. Thirdly, according to the tendencies, economic globalization was helpful to improve nationality industry security degree and the threat of foreign capital M&A to Chinese industry security would further bring down. Fourthly, it was necessary to strengthen to control foreign capital M&A to maintain Chinese industry security. The innovative points in the study mainly focused in three aspects as follows:Firstly, normative economics methods were utilized to evaluate the impact of foreign capital M&A to Chinese industry security. According to utility theory and previous works, industry security was defined as a utility function of industry control power and industry competitive power. The industry security was explained as an indifference curve composed by industry control power and industry competitive power. On that basis above, the impact of foreign capital M&A to Chinese industry security was analyzed from the perspectives of industry control power, industry competitive power and comprehensive analysis. It was an innovative point in method to evaluate the impact of foreign capital M&A to Chinese industry security.Secondly, factor analysis was utilized to do an empirical research on the impact of foreign capital M&A to listed companies' competitive power. Chinese listed company foreign capital M&A cases from 2001 to 2006 were chosen. From the finance corresponsive perspective, factor analysis method was used to analysis the impact of foreign capital M&A to listed companies' competitive power. The samples were grouped by foreign capital resource, foreign capital holding proportion and whether foreign capital to be the first majority shareholder or not. The grouped samples were discussed in statistics and arrived at some referential valuable conclusions.Finally, Diamond Model of competitive power was utilized to research the impact of foreign capital M&A to Chinese industry security. According to essential of Chinese industry competitive power in different criteria of opening to the outside world, Port Diamond Model, Port-Dunning Diamond Model and Double Diamond Model were utilized to analyze the influence mechanism and effect of foreign capital M&A to Chinese industry control power, industry competitive power and industry security, which provided referential method for analyzing the impact of foreign capital M&A to industry security.The research utilized economic theories and methods to do a useful exploration on the proposition of Foreign Capital M&A and Chinese Industry Security, and attained some valuable conclusions, but there were some defects. Firstly, indicator system was not used to analyze the impact of foreign capital M&A to Chinese industry security quantitatively, just chose the evaluation mode of qualitative analysis. The reasons were the shortage of sufficient data and authoritative industry security indicator system. Secondly, the work on constructing game theory model about the impact of foreign capital M&A to industry security was insufficient, and which was not propitious for predicting foreign capital M&A behavior and its impact to industry security within certain market circumstances. Thirdly, the research depth on industry security theory was insufficient, which was not propitious for catching hold the impact of foreign capital M&A to industry security.