Private Acquisitions by Foreign Investors in China: Is the Party Finally Over?

By Peter A. Neumann Faegre & Benson, Shanghai

It is fair to say that WTO accession has brought greater transparency with respect to China's traditionally opaque administrative regulations and practices. While greater transparency arguably leads to greater predictability and accountability for administrative agencies, it presents a Faustian bargain when it provides an occasion for greater restrictions on business. Once the Acquisition of Domestic Enterprises by Foreign Investors Tentative Provisions¹ (外国投资者并购境内企业暂行规定) (the Foreign M&A Provisions or the Provisions) are effective (on April 12 2003), many foreign investors in China may yearn for the days of ambiguous readings of the law and the accompanying flexibility to which they had grown accustomed. In discussing some noteworthy aspects of the Foreign M&A Provisions and exploring their implications for foreign investors in China, we come across a number of problematic issues. Such problems raise the question of whether the Provisions were rushed out as the final regulatory effort of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) before it became the new Ministry of Commerce (MOC).²

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