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

M&A deals involving Chinese parties are becoming increasingly difficult, incentivizing many businesses to abandon these deals especially when sensitive technologies are involved, lawyers say. However, this does not spell the end of these types of transactions, as the new risks do not apply to every single deal, they added.

This article analyses the impact of those challenges on China M&A deals, before outlining possible solutions to mitigate the risks arising from these deals.

This premium content is reserved for
China Law & Practice Subscribers.

  • A database of over 3,000 essential documents including key PRC legislation translated into English
  • A choice of newsletters to alert you to changes affecting your business including sector specific updates
  • Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
For enterprise-wide or corporate enquiries, please contact our experienced Sales Professionals at +44 (0)203 868 7546 or [email protected]