The Chinese government has just issued new regulations so as to
enhance supervision over state-owned assets transactions.
Most state asset deals should be made in the property right
exchange, with over-the-counter transactions being strictly
controlled, said a circular issued by the State-Assets Supervision
and Administration Commission and the Ministry of Finance.
"The sale of state-owned assets should not violate the
restrictive or prohibitive rules concerning the country's economic
safety," the circular said.
The state should retain its absolute control over companies in
key industries after part of state-owned property right is sold, it
said.
The transaction concerning transfer of state assets to a foreign
company should take place in the property right exchange, requiring
approval from relevant governmental departments, according to the
circular.
The circular came amid rising public concerns that foreign
control of key Chinese firms could threaten the country's economic
security.
Carlyle Group, a private equity firm from the United States,
originally offered US$370 million for a 80 percent stake in Xugong,
a leading Chinese construction machinery manufacturer.
The deal was submitted to the Ministry of Commerce for approval,
but was turned down.
The parties signed a new deal then, in which Carlyle reduces its
stake to 50 percent, at a cost of 1.8 billion yuan, or US$225
million roughly.
The Carlyle controversy is drawing attention to other
"questionable" deals, such as the proposed takeover of the Luoyang
Bearing Corporation, a leading bearing producer in China, by
German-based Schaeffler Group.
(Xinhua News Agency January 30, 2007)