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China Briefings

Reports on China issued by Samsung Economic Research Institute

Foreign M&A in China

Foreign M&A in China

Samsung Economic Research Institute Beijing Office

Feb. 6, 2009

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Foreign investment began pouring into China as soon as it embraced economic reform and an open-door policy in 1978. Initially, entry into the Chinese market usually involved joint venture with a Chinese partner, but as the Chinese economy and capital markets matured, the government loosened regulations, allowing for mergers and acquisitions. While deregulation has opened doors in recent years, improved management and governance among Chinese companies has made them more and more attractive to foreign interests. Even China's large state-run companies began to attract foreign investment through stock listings on overseas markets and structural reform.

Typical M&A activity by international concerns involves corporate takeovers but private equity funds and even hostile takeovers have entered the mix. In particular, strategic investments in metal refining, steel, cement and raw materials for the chemical industry have grown rapidly since 2003. Food and consumer products, which represent enormous markets and long-term growth potential, are also attractive targets. In addition, China's financial service industry has become the focal point of many foreign capital-based M&A deals since the country entered the World Trade Organization.

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