By Lin Guan (chinadaily.com.cn)
Updated: 2007-11-16 14:56

The Commission of Science Technology and Industry for National Defense announced yesterday interim rules on military enterprise shareholding reform, allowing State-owned listed companies and qualified foreign investors to acquire or merge the once secretive military firms.

The commission will oversee all the acquisitions and mergers (M&As) and compile guidelines and make necessary changes.

The rules will change the landscape as most weapon manufacturers had been state fed and thus seriously restrained in their development. The latest release encourages weapon makers to blend more with the civilian market by allowing them to raise money from the public.

Currently most so-called listed military enterprises are only on the periphery of the military industry, said Li Xiaoming, a senior analyst from Pacific Securities. However, he was positive the market will dig deeper into the industry's core business as the reform goes on.

Given the provision in the rules that only wholly Chinese owned intermediary agents can participate in the reform, foreign agents or joint ventures are being kept out of the business. However, experts noted the rules won't last forever. As the reform goes further, some eligible partly foreign funded agents could be allowed into the market.