The Foreign Controls Challenges Facing China M&A

January 14, 2024 | BY

Clarence Lee

Current sanctions, the risk of future sanctions, and foreign investment controls are some of the increasingly prominent challenges facing merger & acquisition (M&A) deals involving Chinese parties this year. While there is no universal solution for each transaction, there are still ways parties and lawyers can minimize the risk of problems arising.

Summary

  • Existing sanctions and the risk of future sanctions could make or break a M&A deal as parties would rather not take risks
  • Businesses might have to deal with Chinese restrictions aimed at retaliating Western sanctions
  • The U.S. government foreign investment regime and its newly introduced 'reverse CFIUS' mechanism have deterred businesses from engaging in China M&A deals when sensitive technologies are involved
  • Lawyers have adapted to these changes by strengthening due diligence, carefully drafting sanctions-proof clauses, and removing clients off sanction lists, among other solutions

 

 

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