Investment law must address M&A lacunae

Though the draft of the proposed new Foreign Investment Law aims to significantly reduce the barriers for foreign investment in China, foreign companies are still apprehensive about the provisions relating to mergers and acquisitions, said a report released on Tuesday by global consulting firm, the Boston Consulting Group.

"From a commercial perspective, foreign acquirers have a batch of things to consider besides regulatory approval like: how to add value to justify the purchase price, and how to do post-merger integration. So we cannot expect the number of foreign M&As to increase overnight," said Jeff Walters, partner and managing director of BCG.

According to the draft, when the law comes into effect, most foreign investment, including setting up a new company, will no longer need pre-approval from the State Council. The only exception is where a foreign party intends to invest in one of the restricted industries on the negative list - likely to be based on the Catalogue of Restricted and Prohibited Industries for Foreign Investment.