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M&A boost for companies as state eyes reduced role
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CHINA will continue to simplify approval procedures for mergers and acquisitions in industries facing oversupply to boost consolidation, but the government should reduce its role in the campaign, the State Council has said.
The government was behind some takeovers between state companies in sectors like steel, but many were considered unprofitable and unsuccessful, including the protracted merger of Benxi Iron & Steel and Anshan Iron & Steel in Liaoning Province. In other cross-regional cases, local governments tried to prevent their mills from being acquired by bigger rivals from other provinces, in order to keep hold of tax revenues and jobs.
Now China aims to change the way it regulates the economy, by letting companies make decisions on their own when it comes to M&As and restructuring.
We should “adhere to market-oriented operation, and avoid any ‘matchmaking’ that’s against companies’ wishes,” the State Council said in a statement, reiterating that consolidation is the key to addressing overcapacity and improving profitability.
It added that the government will streamline approval procedures and improve financing, tax and land policies to make things easier for companies seeking consolidation.
Steel giants like Shanghai’s Baosteel Group have been reluctant to swallow smaller rivals though they had completed a series of high-profile takeovers before the 2008 financial crisis. Such approach would actually create big players with huge debt and unprofitable and low-quality capacity, Baosteel Chairman Xu Lejiang said earlier.
The blind expansion was part of the government’s need to reach its goal of having China’s top 10 mills account for 60 percent of the country’s steel capacity by 2015.
Vice Minister of Industry and Information Technology Su Bo said on Monday that the government has interfered too much.
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