Reforms boost M&A activity in China
China has recently ramped up its efforts to encourage mergers and acquisitions in order to support industrial upgrading amidst external challenges. Zhang Yichen, a political adviser and experienced investor, emphasized the importance of policies aimed at ensuring market stability, deepened reforms, and risk prevention, which provide a clear and positive direction for investors. These measures are particularly crucial for private tech enterprises, enabling them to contribute to independent innovation and industrial growth.
Zhang specifically pointed out the significance of the “M&A Six Measures,” a set of policies that promote industrial upgrading and innovation by channeling capital into emerging industries and key technological fields. These measures also allow well-regulated listed companies to engage in cross-sector acquisitions and acquire high-quality yet unprofitable assets. The goal is to address valuation challenges in merger and acquisition transactions, especially for companies listed on Shanghai’s STAR Market.
In September, the China Securities Regulatory Commission introduced the “M&A Six Measures,” which encourage mergers and acquisitions by listed companies as a means of driving industrial progress. These measures aim to facilitate M&A activity, promote corporate growth, and support technological innovation, particularly in sectors of strategic importance. Additionally, the Government Work Report for the year outlined plans to reform and improve enterprise merger, acquisition, and reorganization procedures to deepen comprehensive investment and financing reforms in the capital market.
To fully leverage the benefits of these policies, Zhang suggested the adjustment of solvency regulations for insurance companies to expand their equity investment capacity, particularly in areas aligned with national priorities and investments with reliable returns. By encouraging the establishment and growth of M&A and secondary funds, the investment landscape can diversify, ensuring a more dynamic and supportive environment for companies seeking to engage in mergers and acquisitions.
During this year’s two sessions, CSRC Chairman Wu Qing emphasized the importance of refining support mechanisms for the “M&A Six Measures” to address regulatory bottlenecks in valuation, approval processes, and payment tools. These initiatives aim to optimize resource allocation, enhance corporate growth, and facilitate mergers and acquisitions in the tech innovation sector, particularly those with significant impact. Wu also committed to supporting the development of S funds and M&A funds to expand funding sources and exit channels for such entities.
Zhang highlighted the potential of integrating artificial intelligence into traditional industries, specifically in sectors like smart manufacturing, healthcare, and fintech. With the rise of startups in areas such as semiconductors, AI, and robotics, consolidation through organic expansion and M&A activity will be essential for achieving sustainable growth. Through strategic guidance, resource integration, and capital empowerment, companies like CITIC Capital intend to accelerate corporate development, facilitate tech commercialization, and support industrial innovation to enhance China’s economic development.
