In the news: Investors talk RMB free float objectives, MOFCOM calls for Didi-Uber China merger filing and the State Council sets high R&D goals

MOFCOM cracks down on companies that don't seek merger approval

On August 9 the Ministry of Commerce (MOFCOM), China's merger control watchdog, took the unusual step of revealing that taxi operator Didi Chuxing had not yet sought clearance to buy rival Uber China's assets. It isn't clear whether the transaction breaches MOFCOM's thresholds or if an application has been filed. There is debate over whether Didi should include driver payments in its revenue calculation, which could push the acquisition over MOFCOM's reporting limits. Lawyers say companies sometimes fail to file due to ambiguity over how the control thresholds apply to certain structures or because their deals lie on the borderline, with some even deliberately avoiding the lengthy and uncertain filing and approval process. MOFCOM has, however, stepped up enforcement against these by naming and shaming 11 companies over the past year (which it started doing in 2014), including Microsoft, Bombardier and Hitachi in relation to eight deals that were not filed. The president of Bombardier China said the timing of its deals and the tender bidding process were complicated by the involvement of multiple regulators. Nevertheless, data compiled by Norton Rose Fulbright show that MOFCOM has improved its review process over the past 18 months, with 75% of deals on the simplified procedure track.

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China sets ambitious R&D goals

China plans to increase spending on research and development to 2.5% of its GDP by 2020 in order to foster innovation crucial for growth, according to a State Council document released on August 8. Official figures state that the country spent more than Rmb1.4 trillion, or 2.1% of its GDP, on R&D in 2015. The plan also focuses on new ways to fund innovation via the equity market, and calls for boosting the number of citations for academic papers penned by Chinese scientists and doubling the number of patents per 10,000 people in China by 2020 from last year's figure. China also recently tweaked its GDP formula to account for R&D spending in economic growth, and has been rigorously pushing for innovation by offering national tax breaks and super-deductions for areas including venture capital, high-tech enterprises, R&D, technology transfers and licensing. But whether these incentives have been able to fully entice multinational companies remains uncertain as many don't want to risk disclosing too much IP in the PRC market just yet.

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MEP sets aside Rmb430B to improve water supplies

The Ministry of Environmental Protection said in an August 8 notice that China will spend Rmb430 billion on some 4,800 projects to improve the quality of its water supplies, and that the government has already allocated Rmb13 billion for this year. China is rushing to reverse the damage done by unregulated chemical run-offs, untreated wastewater and excessive use of pesticides and fertilizers, as a survey showed nearly two-thirds of the country's underground water and a third of its surface water are deemed unsuitable for human contact. An incentive system for tackling pollution will reward provinces for completing projects on time and cut funding to regions that fail to spend their allocations, as China has struggled to persuade local governments to build water treatment plants that are expensive and have little impact on economic growth. The anti-corruption campaign has also slowed spending and project approvals, though this has also put a dent in constructions of new heavy-emission plants.

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