MIIT to unveil policy supporting merger

A Chinese newspaper Shanghai Securities New reported that “View on speeding up to promote the merger and reorganization of enterprises” (Short for VIEW) drafted by Ministry of Industry and Information Technology is about to promulgated soon. VIEW will encourage commercial banks to enhance the credit support and try to attract more social capital for merger and reorganization of the enterprises, and what is more, to explore to set up a special mergers and acquisitions (M&A) Fund. Listed companies also get great incentive to use their stocks as consideration for mergers and acquisitions such as absorption merger, tender off and purchase of assets.

As to financial support, VIEW will encourage banks to set up comprehensive credit line after merger and reorganization, advocating cross-border merger and reorganization through syndicated loans both domestic and overseas. Mentioning direct financing, Asset Management Company, Industry Investment Fund and PE are inspired to join into the merger and reorganization while eligible companies are animated to issue shares, bonds and take convertible forms to financing for the enterprises’ merger and reorganization.

VIEW treats different types of industries accordingly. To industries like electric power, coal and non-ferrous, it will encourage key enterprises to form large integrated enterprises by cross-industry merger and reorganization and the expansion of the industry chain. To industries like steel, petrochemical, automobile and ship whose economics of scale is very significant, it inspires large key enterprises to take the lead role to drive forward the trans-regional merger and reorganization. To emerging industries like new source, telecom, biomedicine, the emphasis is to propel all large, medium-sized and small enterprises to form strategic alliances. At last, to labor-intensive industries such as light and textile, it advocates enterprises that have complementary advantages to develop industry clusters through merger and reorganization.

In accordance with the principle of ‘advancing in some areas, whereas retreating in other areas’ of state-owned assets, in competitive areas, a variety of enterprises with competitive edge and advantage of brands will be encouraged and supported to participate the reforming and restructuring of state-owned enterprises; in the industries involving national security, central- government-owned enterprises will be encouraged for restructuring, and takeover and restructuring with central-government-owned enterprise and local enterprises are also encouraged. For the purpose of removing the obstacles of takeover and restructuring of enterprises, the Opinion requires local government to clear any types of administrative barriers, seek the mode for sharing the financial and tax benefits between areas, gradually cancel the administrative class and treatment for the leaders of state-owned enterprises, reform the performance appraisal system for the leaders of state-owned enterprises, and combine the takeover and restructuring of enterprises into the items of appraisal.

The Opinion will lower down the threshold for market access of private capital. Private capital is allowed to get access into the industries and areas that foreign capital is allowed to. Restriction for shareholding will be released. Reforms in the monopolized industries, such as electricity, telecommunications, and oil industries and so on will be accelerated. In addition, the government will make specific promotional measures in the way of favorable tax treatment, land and handling capital debt, and support the takeover and restructuring and overseas takeover in principal industries through soft loan, direct subsidy or other means.

In accordance with the principle of ‘advancing in some areas, whereas retreating in other areas’ of state-owned assets, in competitive areas, a variety of enterprises with competitive edge and advantage of brands will be encouraged and supported to participate the reforming and restructuring of state-owned enterprises; in the industries involving national security, central- government-owned enterprises will be encouraged to intensify the restructuring and merger and reorganization with central-government-owned enterprise and local enterprises are also advocated. For the purpose of removing the obstacles of merger and reorganization of the enterprises, VIEW requires local government to clear any types of administrative barriers, seek the mode for sharing the financial and tax benefits between areas, gradually cancel the administrative class and treatment for the leaders of state-owned enterprises, reform the performance appraisal system for the leaders of state-owned enterprises, and combine the merger and reorganization of enterprises into the items of appraisal.

VIEW will lower down the threshold for market access of private capital. Private capital is allowed to get access into the industries and areas that foreign capital is allowed to. Restriction for shareholding will be released too. Reforms in the monopolized industries, such as electricity, telecommunications, and oil industries will be accelerated. In addition, the government will make specific promotional measures in the way of favorable tax treatment, land and handling capital debt. Besides, soft loan, direct subsidy and other means will also be adopted to support the merger and reorganization and overseas mergers and acquisitions of the principal industries.（Translator: Yalong/ Jessie）

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