China is pushing ahead with its drive to force mergers and acquisitions (M&A) in key industries to create 10 publicly listed companies that could compete with other countries by 2027.
The industries in question include integrated circuits, biopharmaceuticals and innovations, the Shanghai government said, with a target transaction value of 300 billion yuan ($41.4 billion) and total assets of more than 2 trillion yuan.
“[By 2027,] we will greatly improve the capacity of financial intermediaries to support M&A … and strengthen cooperation between market companies, regions, governments and enterprises,” said the Shanghai government, adding that through the development of the M&A ecosystem and industrial capacity, the city can better contribute to the country’s economic development goals ” high quality”.
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High-quality development is central to President Xi Jinping’s vision for China’s future, which emphasizes a transition from high-speed growth to sustainable economic progress driven by innovation.
The Shanghai announcement follows the launch of the China Securities Regulatory Commission’s (CSRC) “six steps for M&A” in September, which were aimed at supporting transactions in strategic sectors to help listed companies advance in technology, renewable energy and other new industries.
The September document also called for “greater tolerance” from policymakers and vowed to “respect market dynamics while following regulatory goals”.
Charlie Chen, 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 steer China’s capital markets in the right direction.”
However, others are skeptical about whether policy-driven integration is at odds with market mechanisms.
“Mergers and acquisitions are important for corporate growth and resource allocation,” said Shen Meng, director at Beijing-based investment bank Chanson & Co. “However, when local governments set M&A goals for listed companies during tight times, they do it. It may focus on achieving these goals with heavy administrative interventions, ignoring the real needs of the market.”
China has seen around 3,000 M&A deals since November, with “strategic emerging” sectors taking center stage. There are about 2,700 offshore listed companies in these sectors, according to the CSRC.
