Would a merger or an acquisition (M&A) with an existing FIE avoid MOFTEC scrutiny?
No. Any change to a FIE is required to obtain MOFTEC approval in advance. Thus, any M&A involving foreign investment falls squarely under control of MOFTEC.
In recent years, the rules on M&A concerning FIEs have been revamped, and now provide a much clearer picture for M&A transactions. However, China has not yet fully developed its laws on unfair competition and regulations on anti-monopoly, and as a result, MOFTEC may require a special hearing, and has the sole discretion on what constitutes a monopoly or a controlling position in the market.
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