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Takeovers Pose 'No Threat'
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The Chinese economy is more secure than ever before, according to Wang Zhile, director of the Multinational Enterprise Research Center under the Ministry of Commerce.


"Although many people raise concerns over the country's economic security while foreign investors' mergers and acquisitions (M&As) keep increasing in China, we find the country enjoys the greatest economic security in its history, or at least since the 1840s," Wang said.


The expert attributed this security to the growing competitive edge of domestic enterprises. Increasing numbers of Chinese firms have gained a place in Fortune magazine's list of the top 500 enterprises in recent years, which Wang said indicates Chinese businesses' potential.


According to Wang, the question of national economic security should only be raised if there is some external threat. Problems arising from the M&As of foreign investors have nothing to do with national economic security, he insisted.


"Foreign-funded enterprises are a major form of business in China," he said, adding that Chinese firms also conduct M&As overseas.


For example, many people have expressed concerns that Carlyle Group's recent attempt to acquire Shenzhen-based Xugong Science & Technology will harm national economic security.


However, Wang said the deal with Xugong would not threaten national economic security if it is acquired by Carlyle or other foreign investors, pointing out the company will remain a Chinese business abiding by Chinese laws.


"If a foreign investor's merger results in monopoly in a sector, it is a problem related to competition rather than economic security," he said.


Government measures to regulate foreign investment had so far proved successful, he said.


The government published a new regulation earlier this month on foreign investors' M&As in China, which stipulates that any M&As which could result in a monopoly must receive government approval.


Economic security has become a hot topic as M&As are a common practice among foreign investors in China. Afraid that foreign funds may gain control of major industries, Chinese companies have called on the government to stall foreign investors' mergers with major Chinese companies.


After the Xugong case, French firm SEB, the maker of Tefal non-stick saucepans, said it had agreed to pay about 240 million euros (US$305 million) to buy a stake of between 51 and 59 percent in Zhejiang Supor Cookware Co Ltd, China's biggest cookware manufacturer.


Double Happiness Co and ASD, China's second-and third-largest makers of pressure cookers, are reportedly planning to ask regulators in Beijing to prevent SEB from taking a controlling stake in Supor.


(China Daily August 26, 2006)

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