Reflection From The Merger Of Xugong The Perfection Of China's Foreign Acquisitions

The Carlyle Group eventually reached a merger agreement with XuZhou Project Group on 16th March, 2007, following two years of arguments and negotiations. According to the agreement, XuZhou project group would own 55% of XuZhou Project Machinery shares and thus will retain the holding right. Extensive debate over acquisitions by foreign capital occurred since the Carlyle Group's declaration to take over the XuZhou Group in 2005 to the final agreement in 2007, among the Chinese people and those in the industry. As early as in 2003, XuZhou project group had already become the biggest enterprise of development, manufacturing and export in that sector. The acquisition of it by Carlyle Group was thus considered as a break to the current situation in the machinery industry, which could result in a monopoly in the industry. Among the experts in this sector there is a widespread agreement; on one hand, it will bring in abound of fund, technology, and management experience, promoting competitive degree; on other hander, however, it will increase market concentration degree, push out other enterprise, increase monopoly .it will reduce effection and incream costs of consumer. The result will affect economy active and democracy. In recent years, market potential being great and completion level low, China's machinery industry has drawn many foreign investors such as Caterpillar, the biggest project Machinery enterprise in world. They come to china with the intention to acquiring Chinese enterprises and to making china their production bases. It will increase monopoly risk. Machinery Industry is a special industry as basic and strategic industry. People begin to worry about industry economy safe, because foreign investor's intend to control the domestic brand and obtain holding right. This incident brings in much thinking about anti-monopoly and economic safety of foreign investment. In many countries, law systems are in place to check up and supervise foreign investment to forestall threats to free market and to a proper competitive level. Law system was set up to protect basic industry and keep important industry out of threatens. China had law about foreign investing control before. But the level of law was low, and it hard to be implemented. The new anti-monopoly law strongly controls foreign mergers and acquisitions. After entering WTO, foreign mergers and acquisitions have become more frequent. It should perfect new anti-monopoly law, increase statutes about economic, strengthen law implementation capability. Synthesize law system; strengthen association law such as firm law, security law. Our aim is to construct a reasonable and good order law system to control foreign mergers and acquisitions.