Officials said through mergers and acquisitions, many domestic industries have already been dominated by foreign rivals.

For example, overseas-funded companies control 50 percent of the washing powder market, 45.3 percent of medical enterprises and 55 percent of key tire factories.

Learning how to correctly conduct mergers and acquisitions is gaining in importance for foreign enterprises entering the market.

According to the related laws and regulations, four major measures are used by foreign companies which are annexing or acquiring domestic enterprises:

Through introduction of new technologies, cash investment or other forms of substantial assets, foreign investors in collaboration with Chinese enterprises can set up joint ventures or shareholding companies so as to control State-owned assets.

Having nothing to do with the transformation of the assets' ownership, this is currently one of the most frequently used methods of merger and acquisition.

Foreign companies can also carry out their merger and acquisition plans in China through two steps: setting up solely-owned enterprises, joint ventures or investment-oriented enterprises; or through new companies established in China.

By purchasing other enterprises' property rights, mergers change a firm’s position to a legal person that has been merged. But, mergers are classified into four different types.

According to a related regulation worked out by the State Trade and Economic Commission in 1998, besides utilizing foreign funds in basic construction and technologies innovations, foreign capital can also be used to acquire other domestic enterprises, to reinforce cash flow and to pay debts.

Mergers which used to take place between two companies or more can also be divided into two types. Through merger, two or more companies may generate a new company and dismiss all the former companies.

On the other hand, the merger may inherit the major part of one former company name and business structures while other companies are disbanded.

However, if a merger is likely to form a monopoly in a certain industry, the Ministry of Foreign Trade and Economic Cooperation would organize hearings to ensure healthy competition on the domestic market.

Nevertheless, there is no standard definition on mergers and acquisitions both in the country and overseas.

Industry experts said such joining are mainly propelled by market demand that leads to the enhancement of investors' assets value.

(China Daily December 17, 2000)