I OVERVIEW OF M&A ACTIVITY

It has been a tumultuous year for Chinese outbound investment as a result of the deterioration of economic relations between China and the United States. On 6 July 2018, the trade war commenced with US$34 billion in tariffs and retaliatory tariffs imposed on each other's merchandise. While tariffs are the centrepiece of the clash, the expected passage of upgraded investment review legislation in the United States with the intent to curtail investment by China will take its toll in the long term.

Overall in 2017, there was a drop of 42 per cent in outbound M&A by Chinese buyers in 2017 compared to 2016, from US$208.7 billion to US$121.4 billion, according to Thompson Reuters. The slump was expected as policies enacted at home at the end of 2016 slowed down the breakneck pace of outbound M&A growth in previous years. Also, owing to investment prohibition by the United States that have stopped Chinese acquisitions, deal flow to the United States slowed dramatically and has all but ceased as of publication in 2018.

As regards domestic regulation, a new approval framework for outbound investment was promulgated. A reorganisation of anti-monopoly enforcement has merged the responsibility of three agencies who had split roles into a single anti-monopoly enforcement agency. A bright spot is the rapid opening up of the financial sector for companies in securities, funds, futures and life insurance.

II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A

There is no unified M&A law governing all M&A activities. Rather, specific M&A activities are subject to different sets of laws and regulations depending on the type of buyer, the target and specific legal issues implicated in the deal. Foreign investment in certain industries requires approval from the competent regulatory body (e.g., investment in banking is overseen by the China Banking and Insurance Regulatory Commission).

i Inbound M&A

In the context of inbound M&A, the laws and regulations applicable to foreign investment in China will generally apply.

Investment vehicles

China recognises a wide range of business vehicles. The three basic forms are the limited liability company, the company limited by shares and the partnership. A business establishment that is the result of foreign investment will generally be referred to as a foreign invested enterprise (FIE).

The most common forms of FIEs are:

  1. joint ventures (JVs) between domestic and foreign partners, including equity JVs and cooperative JVs;
  2. wholly foreign-owned enterprises;
  3. foreign-invested holding companies;
  4. foreign-invested companies limited by shares (FICLS); and
  5. foreign-invested partnerships.

Foreign Investment Industry Catalogue

The Foreign Investment Industry Catalogue serves as the main legal basis under which the government regulates foreign investment industry entry into China. It is therefore the starting point for considering the extent to which the industry of a target of an inbound M&A transaction is open to a foreign investor.

In the current Catalogue, which became effective on 28 July (Catalogue 2018), industries are categorised as 'encouraged' or subject to 'special foreign investment access administrative measures' (the Negative List). The Negative List contains all restrictive measures on foreign investments outside free trade zones (FTZs). Investments subject to the Negative List are further divided into two subcategories: 'restricted' or 'prohibited'. Restrictive measures on investments are typically structured as either limits on the equity interests a foreign investor can hold (i.e., some sectors require Chinese JV partners, and in some cases it is mandated that the Chinese JV partner holds a majority equity interest), or senior executives are mandated to be Chinese. Industries categorised as 'prohibited' are not open to foreign investment.

The Negative List approach is a simplified process whereby foreign investments in industries categorised as 'restricted' or 'prohibited' are subject to approval or denial. Otherwise, industries not on the Negative List will only need to go through record-filing procedures, rather than the case-by-case approval needed under earlier versions of the Catalogue (see below for more on record filing). In accordance with the law, all market participants may enter the relevant industries or businesses not included in the Negative List on an equal basis.

There are also generally applicable investment restrictions limiting the activities of both domestic and foreign investors (e.g., the operation of theme parks, the construction of golf courses and the gaming industry).

Record-filing system

In parallel with adoption of the Negative List, a uniform record-filing administration system was implemented to replace case-by-case approval under the Ministry of Commerce (MOFCOM) for investments in industries not on the Negative List. In general, the establishment of and most changes to existing non-Negative List FIEs, including transformation of non-FIEs into FIEs through an acquisition, strategic investment by foreign investors in listed companies, merger or other method, is under the purview of record filing. However, exceptions include transactions on the radar of antitrust or national security review. Also not eligible for record filing are 'affiliated acquisitions', namely the acquisition of domestic entities through overseas entities that are established or controlled by affiliates of the target.

A strategic investment in a listed company not on the Negative List by a foreign investor is eligible for record filing. This is worthy of note since investments of this type are still subject to a number of legal requirements; however, it is commonly understood that the requirements – including qualification, lock-up period and shareholding ratio of foreign investors – may have been lifted (see 'Inbound M&A transaction involving A-shares listed companies', below).

All record filings are required to be carried out via a uniform online platform, largely eliminating the uncertainty of different interpretations by local officials.

Nationwide and FTZ negative lists

The Negative List is applicable nationwide for investments outside FTZs. For investments within FTZs, a separate negative list is implemented under the Special Administrative Measures for Foreign Investment Access to Pilot Free Trade Zones (the FTZ Negative List). The latest revision of the FTZ Negative List became effective on 30 July 2018. It halves the number of listed restrictions and eases shareholding ratios in a number of categories.

Regulators in public statements in April 2018 gave positive signals about the parallel development of a Negative List (nationwide) and a FTZ Negative List, with the latter continuing to enjoy greater openness.

In some sectors (e.g., finance, where there is a substantial similarity between the Negative List and the FTZ Negative List in restrictions, such as shareholding limits), companies operating in the FTZs can still enjoy more flexibility in their day-to-day operations. For example, FTZs in Shanghai, Guangdong, Tianjin, Fujian, Chongqing have simplified procedures for controlling foreign capital. Foreign-invested companies in these FTZs enjoy expedited processing in opening a foreign currency account and receiving payment in a foreign currency.

As for the number of FTZs, this still stands at 11 locations. That number has not increased recently and it is the stated policy of MOFCOM to de-emphasise expanding the number of FTZs but rather to focus on improving the quality of existing FTZs. MOFCOM has indicated it will deepen liberalisation in existing FTZs through concentrating on promoting openness in the areas of finance, education, culture, medicine and general manufacturing.

M&A regulations

Inbound M&A transactions by foreign investors are primarily governed by the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (M&A Regulations)2 developed by MOFCOM.

The M&A Regulations mainly concern:

  1. the acquisition of equity interest in and assets from Chinese domestic enterprises;
  2. the establishment of offshore vehicles for the purposes of listing Chinese assets through an offshore initial public offering;
  3. the establishment of FIEs by offshore entities set up or controlled by Chinese domestic enterprises and Chinese residents; and
  4. the swapping of shares between a foreign company or its shareholders and the shareholders of a Chinese domestic enterprise.

The M&A Regulations also provide detailed procedures and rules regarding the acquisition of domestic companies by foreign investors, including approval procedures, acquisition prices and terms of payment. However, they are not comprehensive and do not apply to the following inbound M&A transactions by a foreign investor:

  1. acquisitions of the equity or subscription of a capital increase of an existing FIE (covered by regulations on equity changes of the investors of FIEs);3
  2. mergers between or acquisitions of a domestic enterprise through an existing FIE (the ambit of regulations for mergers and divisions of FIEs and reinvestment by FIEs);4 and
  3. acquisitions of a domestic limited liability company and the transforming of the same into an FICLS (governed by regulations on the establishment of an FICLS).5

If a foreign investor's acquisition of a domestic enterprise has a bearing on national security, the acquisition may also be subject to a national security review by a ministry-level co-chaired committee, generally involving MOFCOM, the National Development and Reform Commission (NDRC) and, if necessary, other governmental regulators.

Acquisition of state-owned assets or equity

Inbound M&A transactions aimed at acquiring state-owned assets or equity are subject to a rather complex legal regime and strict supervision by the Chinese authorities, including the State-owned Assets Supervision and Administration Commission of the State Council (SASAC). In general, sales of state-owned assets or state-owned enterprises (SOEs) (with few exceptions) must be approved by SASAC (or its provincial and local counterparts) or by the relevant SOEs that are empowered with approval authority. Acquisitions of state-owned assets or SOEs are also subject to a mandatory appraisal conducted by a qualified appraiser and, as a general principle, the actual transfer price for the state-owned assets or equity shall not be less than 90 per cent of the value determined by the appraiser, except if a price lower than the 90 per cent threshold is approved by the competent authority.

Inbound M&A transactions involving A-shares listed companies

PRC domestic stock exchange-listed companies currently issue two classes of shares, namely:

  1. A-shares, which are yuan-denominated shares reserved for Chinese investors, qualified foreign institutional investors (QFIIs), yuan-qualified foreign institutional investors (YQFIIs) and qualified foreign strategic investors; and
  2. B-shares, which are yuan-denominated shares traded in foreign currency (in US dollars on the Shanghai Stock Exchange and in Hong Kong dollars on the Shenzhen Stock Exchange) and available for purchase by both Chinese and foreign investors.

To qualify as a foreign strategic investment in a domestic-listed company, a foreign investor needs to purchase at least 10 per cent of the A-shares of a listed company, by way either of a private placement or a share transfer, and generally be subject to a three-year tie-in period and other prescribed conditions.

In addition, to purchase through QFIIs or YQFIIs, or through qualification as a strategic investment, a foreign investor may acquire A-shares indirectly through an existing FIE that holds or is eligible to hold A-shares of a listed company.

ii Outbound cross-border investments

A new regulatory regime for outbound investments, Administrative Measures for Outbound Investments by Enterprises (the Outbound Investment Circular), came into effect on 1 March 2018, specifying filing or approval requirements for outbound investments. The main gist of the Outbound Investment Circular is the application of a framework of filing or approval requirements on both direct and indirect outbound investments based on the sensitivity of a project. The Outbound Investment Circular issued by the NDRC cements the build-up of regulatory policy changes since late 2016 when authorities adopted practices to curb outbound investment in sensitive sectors. It also builds on the Guidelines on Further Guiding and Regulating the Directions of Outbound Investments issued in August 2017 (the Outbound Investment Guidelines), which divided types of outbound investments into the categories of 'encouraged', 'restricted' and 'prohibited'.

The Outbound Investment Circular also has the important consequence of bringing under regulatory coverage the sponsorship of, or investment in, offshore investment funds with outbound investments by Chinese entities, including offshore entities controlled by Chinese companies or individuals. This puts indirect investments under the purview of outbound approval regulation by the NDRC. Previously, if funds were transferred offshore for an indirect investment, the transaction, although subject to domestic foreign exchange regulations, was outside the regulatory approval of the NDRC.

Under the previous regulatory framework, it was necessary to file a project information report for projects exceeding US$300 million before 'carrying out any substantive work'. This 'small pass' requirement at the early stage of a project has been eliminated. Approval, filing or reporting requirements under the NDRC under the new framework are timed at completion (financial closing).

NDRC

The approvals and registrations for outbound investment must be obtained or conducted through the NDRC, MOFCOM and the State Administration of Foreign Exchange (SAFE). For SOEs, there are additional reporting obligations and a required approval from SASAC (not covered in detail here).

The starting point is to determine the proper regulatory obligation before the NDRC. Approval of a project before financial closing by the national level NDRC is required for sensitive projects. However, for a non-sensitive project undertaken by a non-central state-owned enterprise worth over US$300 million, a filing with, rather than approval from, the national level NDRC is necessary. For non-sensitive projects under US$300 million, conducting a filing is necessary with the provincial level NDRC. For indirect, non-sensitive investments made through an offshore investment fund that exceeds US$300 million in value, a report to the NDRC must be submitted before the financial closing; for such projects below US$300 million, there is no reporting requirement. The applications for filing, approval and reporting are done through the NDRC's online platform.

Sensitive projects are outbound investments to sensitive countries or in sensitive sectors. The 2018 Catalogue of Sensitive Industries for Overseas Investment defines sensitive sectors as industries listed as restricted under the Outbound Investment Guidelines (i.e., real estate, hotels, cinemas, entertainment, sports clubs), news media, among others. Sensitive host countries are those that do not have diplomatic relations with China (i.e., 17 countries and the Vatican recognise Taiwan), are at war, or barred by international treaties agreements or treaties to which China is a party.

MOFCOM

Following the execution of the definitive transaction agreements, an 'application form of outbound direct investment' should be submitted online to MOFCOM. The application package includes the application form, transaction agreements, the business licence of the buyer, an export permit for products or technologies (if applicable) and a statement from officers of the companies warranting the veracity of the proposed outbound investment. MOFCOM approval is typically received within 10 to 15 business days of the date on which the application satisfies the filing requirements, and culminates in the issuance of an enterprise overseas investment certificate.

SAFE

After obtaining an enterprise overseas investment certificate from MOFCOM, an application of 'foreign exchange registration on outbound direct investment' is made to a commercial bank under the supervision of SAFE, which will include the business licence of the buyer and the enterprise overseas investment certificate, with a statement of foreign exchange funding sources. Following submission, an overseas investment foreign exchange registration certificate will be issued to the buyer.

III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACT

i 2018 amendment to the Negative List

The new Negative List 2018 came into effect on 28 July 2018, while the Encouraged Industries List under Catalogue 2017 remains unchanged. As well as renewal of the Negative List, limitations on foreign ownership have been removed in a large number of sectors, including manufacturing (e.g., new energy cars) and agriculture (e.g., wholesale rice markets). The opening up of the financial sector is the most anticipated (see below).

The liberalisation in 2018 further builds on the major steps that became effective in July 2017, when restrictions were removed in rail transportation equipment manufacturing, motorcycle manufacturing, fuel ethanol production and oil processing, services in relation to road passenger transport, credit enquiry and rating firms, among other sectors.

ii Opening up of the financial sector to foreign investment

In 2018, a number of laws and measures eased restrictions on foreign investment in the financial sector or made commitments to further liberalise based on a set timetable. Major steps include the following:

  1. In Catalogue 2018, the cap on foreign ownership in companies in securities, funds, futures and life insurance is increased to 51 per cent and all limits on ownership by foreign investors are due to be removed in 2021.
  2. The removal of restrictions on the business scope of jointly funded securities companies by the end of 2018.
  3. The removal of restrictions on the business scope of foreign-invested insurance brokerage companies.

IV SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES

i End of Chinese M&A in the United States and amendments to the CFIUS

The Trump administration has called for an amendment to the statute authorising the Committee on Foreign Investment in the United States (CFIUS), which oversees foreign investment review on national security grounds, with the goal of further tightening the screening of Chinese investment. Since the second term of the Obama administration, the CFIUS has aggressively blocked proposed Chinese deals, particularly in semiconductors (see subsection ii). Chinese acquisitions in the United States have come to a screeching halt in 2018 and the CFIUS amendment could calcify this state of affairs. As at the end of June 2018, announced deals in the United States by Chinese buyers totalled only US$1.6 billion; that is down from nearly US$60 billion in announced deals in 2016.

The CFIUS has broad authority to disallow or impose remedial measures on acquisitions in which a foreign buyer achieves control of a US business determined by the committee to threaten US national security. The Foreign Investment Risk Review Modernization Act (FIRRMA) is an amendment to the CFIUS currently wending its way through US Congress that would expand CFIUS jurisdiction to include non-controlling transactions. Chinese investment is the primary concern driving the proposed legislation. As at July 2018, the US Senate and House of Representatives have passed different versions of FIRRMA Bills. Both versions would update many areas of CFIUS law, including bringing coverage of acquisitions of US critical technology or critical infrastructure companies in the Senate version or, in the House version, singling out buyers from a 'country of special concern' (i.e., countries like China that are subject to US export controls). The differences will need to be ironed out but the updated legislation is expected to pass later in the year. Further impetus has been given to passing the Bill with President Trump's personal support. In July 2018, the President considered issuing an emergency order to implement China-specific investment restrictions. He decided not to take action under his presidential authority but in remarks expected FIRRMA to be passed to take on the role of targeting investment by China.

In practice, the harsh approach of the CFIUS towards Chinese deals under both the Trump and Obama administrations would not be distinguishable from the effect of proposals for updating the CFIUS since Chinese deals in the United States have all but vanished. However, the expected passage of the amendment to the CFIUS is more durable than policy changes within an administration and are likely to have long-term damage on Chinese investment in the United States.

ii Trump–Obama continuum in blocking Chinese semiconductor M&A

The Obama administration had strongly discouraged Chinese buyers from semiconductor investments, denying several large proposed deals. The transactions were either prohibited outright by the CFIUS or the threat of CFIUS denial alone was enough to persuade sellers from entering into deals with Chinese buyers.

In 2016, the US$3.3 billion sale of Lumileds, a semiconductor division of Philips, to a consortium including Chinese buyers was blocked.6 Also that year, Fairchild Semiconductor refused a Chinese buyer's offer for fear of CFIUS interference.7 (Coincidentally, a proposed deal for Fairchild Semiconductor by Fujitsu in 1988, during a period of American anxiety over soaring Japanese economic competitiveness, led to the passage of the Exon-Florio Amendment, an update to the CFIUS that brought the process into the contemporary era.) In the waning days of the Obama administration in December 2016, the CFIUS blocked the proposed purchase by a Chinese buyer of Aixtron SE, a German semiconductor company that had some assets in the United States. The entire deal became unviable because of the disallowed sale of the US assets.8

Under the Trump administration, the CFIUS has continued to block Chinese semiconductor investments. In 2017, the sale of Lattice Semiconductor to a Chinese buyer was denied.9 In 2018, Broadcom's bid for Qualcomm was blocked by the CFIUS. This was particularly notable since Broadcom is a Singaporean company. The CFIUS justified blocking the sale by claiming to fear underinvestment by Broadcom in Qualcomm after the acquisition, making the target company uncompetitive in the face of future Chinese competition. The justification given by the CFIUS is remotely tied to concerns about US national security and illustrates the lengths to which the Trump administration will go to intervene in semiconductor deals as part of a policy of economic confrontation with China.

V FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS

Since late 2016, policymakers have sought to reduce the outflow of capital from China through stricter screening implemented by the NRDC, MOFCOM and SAFE. In response to the effect of these policies on curtailing financing for outbound M&A, Chinese investors developed alternative modes of fundraising to minimise domestic regulatory scrutiny, including the use of:

  1. a guarantee or security structure in which a Chinese onshore entity or individual grants a guarantee or security for a debt owed to an offshore creditor by an offshore debtor – usually a subsidiary or controlled entity of the guarantee or security provide;10
  2. cash collateral to domestic banks for issuing standby letters of credit or bank guarantees to overseas lenders;
  3. loans advanced by foreign lenders to overseas Chinese investors' subsidiaries secured by assets located outside China; and
  4. equity and debt issuance in overseas markets.

Private equity has a major role in outbound M&A. While overall there was a 42 per cent drop in outbound M&A by Chinese buyers in 2017 compared to 2016, there was a fall of only 9 per cent in private equity investment in mainland outbound M&A, from US$37.4 billion to US$34.1 billion in the same period.11

VI EMPLOYMENT LAW

M&A transactions have triggered labour disputes or strikes leading to collective labour arbitration, hindering the completion of deals.

Labour relations are established in the form of employment contracts and, barring any change to the subject qualification of an employment contract,12 labour relations are usually not affected. According to Article 40 of the Labour Contract Law and Article 26 of the Labour Law, a target has the right to terminate an employment contract if a material change in the objective circumstances relied upon at the time of conclusion of the contract renders it impossible for the seller to perform and, after consultation, the employer and the employee are unable to reach an agreement on amending the employment contract. As such, unless the M&A transaction leads to a 'material change of the objective circumstances' or the 'subject qualification' of the seller being eliminated, the seller does not hold a unilateral right to terminate the employment contract.

Whether an M&A transaction has caused a change in either condition depends to a large extent on the type of transaction. In general, a share acquisition does not affect the change of the legal subjects of the parties. Nor is it a 'material change of the objective circumstances' to the employment contract, so this type of transaction has no basis in providing the seller with the unilateral right to terminate the employment contract. In the case of an asset acquisition or business reorganisation, if it involves a transfer of assets, then this may constitute a 'material change of the objective circumstances' and the seller may unilaterally terminate employment contracts with employees.

Even though there is a right to unilaterally terminate an employment contract, the seller must still hold good faith negotiations with the employee to work out a comparable position before exercising termination. If the employment contract is terminated, the seller must provide severance based on the number of years of employment. In the case of large-scale layoffs of employees, sellers must carry out negotiations with the employees' labour union and the local government to formulate a plan that includes providing advance notice to the employees.

VII TAX LAW

The State Administration of Taxation (SAT) levies enterprise income tax (withholding tax) of 10 per cent on the taxable income obtained by non-resident enterprise (NRE) transferors through cross-border M&A. In 2017, owing to an increase in the auditing of NREs, disputes with the SAT regarding the interpretation of tax rules have grown.

SAT Announcement (2017) No. 37 (which replaced the original Circular (2009) No. 698) and Circular (2009) No. 59 together constitute the overall framework of the rules regarding the treatment of taxable income for NREs in M&A transactions. However, the issuance of Announcement (2017) No. 37 has not completely resolved disputes in terms of tax collection and enforcement on NRE in cross-border M&A transactions, which has required the SAT to publish guidance announcements to further amend and explain Circular No. 59 and Announcement (2017) No. 37.

VIII COMPETITION LAW

After sweeping changes were enacted in March 2018, the anti-monopoly enforcement functions of three agencies (the Anti-Monopoly Bureau of the Ministry of Commerce, the Price Supervision/Inspection and Anti-Monopoly Bureau of the National Development and Reform Commission, and the Anti-Monopoly and Anti-Unfair Competition Bureau of the State Administration of Industry and Commerce) were consolidated under the control of the State Administration for Market Regulation (SAMR), including the role of reviewing for merger control.

M&A transactions meeting statutory thresholds and circumstances constituting a 'concentration of undertakings' (i.e., an acquisition of control over a target) are subject to the merger control provisions of the Anti-Monopoly Law. If in the preceding financial year, (1) the combined global turnover of the undertakings (i.e., the buyer or the target) exceeds 10 billion yuan, and the turnover from the PRC of each of at least two of the undertakings exceeds 400 million yuan, or (2) the combined turnover from the PRC exceeds 2 billion yuan and the turnover from the PRC of each of at least two of the undertakings exceeds 400 million yuan, then the transaction must obtain clearance from the relevant Anti-Monopoly Law enforcement agency.

In 2017, 400 applications were received, of which 353 were accepted – 344 of those were cleared. Seven applications were approved with conditions, a new high under the Anti-Monopoly Law. The percentage of (non-simple cases) increased significantly, to 30 per cent from 21.4 per cent in 2016.13 However, the average time for acceptance and clearance shortened by 14.2 per cent and 8 per cent respectively, and 97.8 per cent of the simple cases were cleared at the first stage (30 calendar days following acceptance of the application).

MOFCOM has strengthened enforcement to ensure compliance with filing requirements. In 2017, six applications were published by MOFCOM for failure to file and obtain clearance before closing. Punishment amounts to fines of no more than 500,000 yuan, though MOFCOM has the authority to go further and order the unwinding of a transaction or divestiture of certain businesses or assets.

IX OUTLOOK

The poor state of economic relations between China and the United States could deteriorate with a worsening trade war and economic confrontation. Under these circumstances, the prospects for a recovery in Chinese investment in the United States are dim. The enactment of hard-line CFIUS reforms are likely to have a lasting negative effect, shutting down Chinese investment in the United States in the long term.

As China continues to grow as a significant capital exporter, investment will go to destinations outside the United States. In the first half of 2018, a trend has emerged of Chinese buyers looking to Europe, with a 39 per cent increase in announced deals compared to 2017. State-backed investment funds organised to promote the Belt and Road Initiative (BRI), the Xi administration's signature economic initiative to enhance economic links between Eurasian countries, will spur state-owned companies and funds, and private investors to act as consortiums for making investments in BRI countries.

Domestically, regulatory changes in clearing categories from the Negative List and scrapping restrictions, particularly in the financial sector, should be attractive to foreign investors.


Footnotes

1 Wei (David) Chen is a managing partner, Yuan Wang is a partner and Kai Xue is a counsel at DeHeng Law Offices. The authors would like to thank Tong Yongnan, Wang Guan, Wang Yuwei, Hu Tie, Zhang Xu, Shen Sisi and Dong Jie for their assistance in preparing this chapter.

2 As last amended on 22 June 2009.

3 Mainly, Certain Regulations on the Change of Investors' Equities in Foreign Investment Enterprises promulgated by the former Ministry of Foreign Trade and Economic Cooperation (predecessor of MOFCOM) and State Administration for Industry and Commerce on 28 May 1997.

4 Mainly, Regulations on the Merger and Division of Foreign Invested Enterprises promulgated by the former Ministry of Foreign Trade and Economic Cooperation and State Administration for Industry and Commerce on 22 November 2001, and Provisional Regulations on the Reinvestment of Foreign Invested Enterprises in China promulgated by the former Ministry of Foreign Trade and Economic Cooperation and State Administration for Industry and Commerce on 25 July 2000.

5 Mainly, Provisional Regulations on the Establishment of Foreign Invested Companies Limited by Shares as last amended on 28 October 2015.

7 'Fairchild rejects Chinese offer on US regulatory fears', Reuters, https://www.reuters.com/article/us-fairchild- semico-m-a-idUSKCN0VP1O8.

8 Kirkland & Ellis Discusses President Obama Blocking a Chinese Takeover of a German Semiconductor Company, The CLS Blue Sky Blog, clsbluesky.law.columbia.edu/2016/12/21/kirkland-ellis-discusses-president-obama-blocking-a-chinese-takeover-of-a-german-semiconductor-company/.

10 Known as neibaowaidai.

11 Source: Thomson Reuters.

12 According to the relevant provisions of the Labour Contract Law, an enterprise with the subject qualification of labour and employment means it is established in the territory of PRC, has not been declared bankrupt according to law, and no business licence has been revoked, been ordered to close, been revoked or been decided to be dissolved ahead of schedule.

13 The following types of transactions are generally eligible for the simple application procedure: (1) horizontal mergers in which the combined market share of the parties is less than 15 per cent; (2) vertical mergers and conglomerate mergers in which each party's market share is less than 25 per cent; (3) acquisitions of shares or assets of a non-Chinese company that does not conduct economic activities in China; (4) the establishment of a non-Chinese joint venture that does not conduct economic activities in China; and (5) changes in control of a joint venture whereby the joint venture becomes controlled by one or more of the previously jointly controlling parents.