Arya News - China is advancing its drive to force mergers and acquisitions (M&A) in key industries to build up 10 publicly listed companies that can be internationally competitive by 2027. The industries in question include integrated circuits, biopharmaceuticals and new materials, the Shanghai government said, with a target transaction volume of 300 billion yuan (US$41.4 billion) and total assets in excess of 2 trillion yuan.
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China is advancing its drive to force mergers and acquisitions (M&A) in key industries to build up 10 publicly listed companies that can be internationally competitive by 2027.
The industries in question include integrated circuits, biopharmaceuticals and new materials, the Shanghai government said, with a target transaction volume of 300 billion yuan (US$41.4 billion) and total assets in excess of 2 trillion yuan.
"[By 2027,] we will have significantly improved the capacity of financial intermediaries to support M&A ... and strengthened the collaboration among market entities, districts, governments, and enterprises," the Shanghai government said, adding that with an enhanced M&A ecosystem and industrial capacity, the city can better contribute to the country"s "high-quality" economic development goals.
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High-quality development is central to President Xi Jinping"s vision for China"s future, which emphasises a shift from high-speed growth to sustainable and innovation-driven economic progress.
The Shanghai announcement follows the China Securities Regulatory Commission"s (CSRC) introduction of the "Six M&A Measures" in September, which was aimed at supporting transactions in strategic sectors to help listed companies move towards hi-tech, renewable energy and other innovative industries.
The September document also called for "greater tolerance" from policymakers and vowed to "respect market dynamics while upholding regulatory principles".
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Charlie Chen, the head of Asia research at China Renaissance Securities, said "we believe the Shanghai government"s announcement to support M&A activity is an important strategic document to direct China"s capital markets to the right path."
However, some are sceptical about whether policy-guided mergers are at odds with market mechanisms.
"Mergers and acquisitions are essential for corporate growth and efficient resource allocation," said Shen Meng, a director at Beijing-based investment bank Chanson & Co. "However, when local governments set ambitious M&A targets for listed companies within tight time frames, they may focus on achieving these goals through heavy administrative intervention, ignoring the actual market needs."
China saw about 3,000 year-to-date M&A deals as of November, with "strategic emerging" sectors taking centre stage. Nearly 2,700 onshore-listed companies are in these sectors, according to the CSRC.
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With a nagging property market and a slowing economy that is weighing on business confidence and investments, the Greater China region, comprising the mainland, Hong Kong and Taiwan, saw a 57.4 per cent decline in total M&A transaction value in the second quarter of this year, according to data published in November by S&P Global.
The initial public offering (IPO) market is also facing headwinds amid stiff regulation, with 95 A-share market IPOs in the pipeline seeking to raise 61.8 billion yuan as of November, a year-on-year decline of 83 per cent, according to EY. These are the lowest levels seen since 2014.
This article originally appeared in the South China Morning Post (SCMP) , the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP"s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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