China domestic share markets open to foreign and private investors

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China announced on the 8th of October new merger and acquisition rules which will allow private and foreign investors to take controlling stakes in domestically-listed companies. Foreigners were officially forbidden in 1995 from buying the unlisted shares of quoted companies so this paves way for a potential wave of acquisitions by foreign and private companies, which have long been kept out of China's domestic share markets. None of China's 1,200 listed companies is majority foreign owned and only a handful are privately held, while most are state-owned corporations in which a minority stake, often only 25%, is floated.

Investors taking a controlling stake in a listed company will not be allowed to transfer control within 12 months of the purchase and the rules say a holding of 30% or more is considered a controlling stake, including provision for the purchase of both unlisted and listed shares.

The rules will take effect on the 1st of December 2002. However exact conditions of proposed acquisitions by foreign investors may remain unclear until a set of draft CSRC regulations is published.

To learn more about these rules and the opportunity they bring for foreign investors wanting to enter China's domestic share markets, please contact Luke Filei on [email protected] or telephone number +86 21 628 96363.