China's long awaited Anti-monopoly Law is expected to be passed next week, requiring foreign companies to go through both anti-monopoly and national security checks when merging with or taking over Chinese enterprises.
"As well as anti-monopoly checks stipulated by this law, foreign mergers and acquisitions of domestic companies or foreign capital investing in domestic companies' operations in other forms should go through national security checks according to relevant laws and regulations if the cases are related to the issue," the latest version of the draft said.
The adjustment was to make the regulation clearer, Jiang Qiangui, deputy director of the Law Committee of the National People's Congress (NPC) told the ongoing session of the NPC Standing Committee on Friday when submitting the bill for consideration. The previous version only said foreign investors' mergers and acquisitions of domestic companies should go through national security checks.
She said the draft law was "ready for adoption". The draft is expected to be put to the vote next week and, if it is passed, is expected to take effect on August 1, 2008.
The requirement for a national security check was added to the draft as a result of increasing foreign mergers and acquisitions in the country.
The number of foreign mergers and acquisitions only accounted for 5 percent of all forms of foreign direct investment in China before 2004. The figure increased to 11 percent in 2004 and to almost 20 percent in 2005.
The draft also added a provision, saying, "Companies that can provide evidence to prove they have no dominant status in the market should be cleared of monopolistic charges."
Learning from the experiences of a number of Western countries, China's draft Anti-monopoly Law not only prohibits monopoly agreements and abuse of a dominant market position, but also the abuse of administrative powers to exclude and restriction competition, said Wang Xiaoye, a senior researcher at the Chinese Academy of Social Sciences.
The Anti-monopoly Law was first drafted in 1994 and submitted for its first review in June 2006. It was submitted for its second review in June this year.