China starting to say BuYao to foreign aquisitions,

Found at http://news.yahoo.com/s/afp/20060410/bs_afp/chinaeconomymergerinvest_060410045349

Comments, anyone?

A broad coalition of officials and businesspeople have voiced concern that massive sales of China's assets could lead to foreign monopolies in key sectors, the China Daily Business Weekly newspaper reported.

"If China lets multinationals' malicious mergers and acquisitions go ahead freely, China can only act as labor in the global supply chain," said Li Deshui, China's former chief statistician, according to the paper.

The mood change has come about due to a combination of national pride and protectionist urges, partly in response to growing US and European resistance to low-cost Chinese exports, the paper said.

The more patriotic atmosphere may already have thrown a number of important acquisitions into limbo, the paper said.

It cited plans by US fund Carlyle Group to acquire Xugong Group, China's largest construction equipment maker, for three billion yuan (370 million dollars), in the nation's largest private equity buyout yet.

The deal has stalled, and people familiar with the situation suggested the commerce ministry was refusing to approve it unless Carlyle promised not to sell its majority stake to another foreign group in the future, the paper said.

If the new less welcoming sentiment persists, it will happen at an awkward time in China's growing economic interaction with the rest of the world.

Many foreign investors now prefer acquisitions of existing Chinese enterprises rather than Greenfield investments, where operations have to be built from scratch, because it saves time.

China reported 66 billion dollars' worth of mergers and acquisitions last year, up 12 percent from the year before, making it number one in Asia outside Japan.

Significantly, in the same period foreign Greenfield investment fell 0.5 percent to 60.3 billion dollars, according to commerce ministry figures.

Fei Guoping, director of the China Mergers and Acquisitions Association under the All-China Federation of Industry and Commerce, warned against putting up barriers to foreign acquisitions, saying it would hurt China's development.

"These emotions about foreign capital are the last thing we want," he told the paper.

"What we want is to make sane progress in building a merger and acquisition review system based on national economic security."

The basic problem is the lack of a law and a government agency charged with assessing the implications major deals may have for

national security, Fei said.