Trends in Mergers & Acquisitions: the Restructuring of Domestically Listed Chinese Companies

Restructuring is a word that many Chinese companies are familiar with. Effective restructuring, however, requires developed capital markets. The absence of these has meant that most restructuring activity in China takes the form of asset transfers and the private sale of shares. We illustrate the most common techniques used by Chinese companies and take a look at the future of restructuring in China.

The development of China's equity markets as a mechanism to restructure Chinese companies is a fundamental objective of the Chinese government in creating a bona fide market economy. The premise is that an efficient equity regime will be important for re-allocating assets in society and reorganizing companies.1 Below is an overview of the principal techniques employed to restructure listed Chinese companies. These techniques illustrate that for a variety of reasons to date, most restructurings involving listed Chinese companies are limited to asset transfers and private sales of shares. As such, China has a long way to go to develop market-based capital markets providing varied opportunities for restructuring companies.

The table below summarizes restructuring activities among listed Chinese companies last year.

 Restructurings Among Listed Chinese Companies in the Year 2000. 2
*Unofficial Statistics