Economy

MARC index rates China as 'mature'

(China Daily)
Updated: 2011-03-23 11:22

BEIJING - China has emerged as a major attraction for cross-border merger and acquisitions (M&A) activity, and has for the first time been classified as a "mature" market for such deals.

That's according to data published in a global M&A index on Tuesday.

The Cass MARC Maturity Index is compiled by the M&A Research Centre (MARC) at the Cass Business School in London in collaboration with MergerMarkets. It rates 175 countries according to various criteria, including regulatory, economic, financial, and technological environments,

It is the only index of its type to illustrate an individual country's ability to attract and sustain M&A, and to identify areas that require improvement.

China scores 2.2 on the index, driven by the country's favorable conditions for the economy, finance and technology.

Meanwhile, the index rates China as a "mature" market for M&A activity, after originally classifying it as a "transitional" market.

China has attracted a large number of deals involving foreign firms during the last decade, in addition to its own domestic M&A activity.

According to the international accounting firm PricewaterhouseCoopers (PwC), Chinese M&A hit a record level last year, with 4,251 announced transactions valued at more than $200 billion. Compared with 2009, the number of deals increased by 16 percent and the value rose 27 percent.

"With China emerging stronger than ever as other markets continue to recover slowly after the global credit crisis, this trend is likely to continue," according to the accompanying report.

Related readings:  M&As of listed companies hit 989b yuan in 2006-2010  Foreign M&As given oversight  M&A deals rose by 30 percent last year  China spends $91b on overseas M&As in 3 yrs

China's economic environment is rated as 1.7 on the index, which is better than the "mature" market average of 1.9, where a higher score indicates a less favorable environment.

The index highlights the country's technological environment, calling it "highly favorable for M&A".

Under China's 12th Five-Year Plan (2011-2015) overseas investment in the high-tech industries is welcomed and foreign companies are being encouraged to participate in M&A and to build research and development (R&D) centers.

In recent years, the country has invested 1.5 percent of its GDP in R&D, according to the World Bank. That has stimulated domestic innovation, as evidenced by the high number of patents granted to companies of Chinese origin, which totaled around 49,000 in 2008, according to the World Intellectual Property Organization. That places China among the global top five countries for innovation, surpassed only by Japan, the United States, South Korea and Germany.

According to the research body, the Economist Intelligence Unit, improved protection of intellectual property rights in the pharmaceutical sector and government-sponsored incentives have spurred international companies to invest in R&D in the country.

The conclusion of the report says that M&A deals will focus on high-tech companies to an increasing degree, including sectors that are well-positioned to take advantage of domestic consumer spending during the coming years.