... .. opinion


The government must tread carefully while handling mergers and acquisitions (M&As) involving State assets, an article in the Shanghai-based Jiefang Daily said.

M&As are increasingly frequent in China, as the market system grows up and the country embraces global competition.

And they are important ways of building up enterprises and bolstering the economy.

But M&As between or with State companies often involve many special problems which require the government's proper handling, the article said.

Although Western governments rarely step into M&As, government intervention is necessary in many of such cases in China given the country's different situation.

Functioning as the supervisor of State assets, the government has to participate in M&As involving State enterprises for the State's interests.

Such participation is warranted as long as it conforms to market principles.

The market system is still immature in some ways, which also makes it necessary to have government intervention in M&As.

The government should try to enhance its capability of influencing the economy through M&As of State assets, the article said.

In the past when the economy was highly centralized, State enterprises dominated nearly every trade, resulting in low efficiency.

This problem is in stark contrast with the country's deepening of market reform and accession to the World Trade Organization.

M&As of State enterprises - the mainstay of China's economy - are "of strategic importance" to improving the profitability of State assets and solidifying the fundamentals of the national economy, the article said.

Through M&As the government can increase its stake in sectors such as energy and transport, which are lifelines for the economy.

Meanwhile, some lame State assets in competitive industries can be assigned, leaving more room for fair play between non-State companies.

The withdrawal of State assets from competitive sectors is good for the health of the market system, and will help renew the government's role as an unbiased economic planner and watchdog, the article said.

In the process of M&As, the government needs to be tactful in fixing the price of State assets, the key to successful transaction, the article said.

The pricing of State assets is often manipulated by vested interests, which may hike the price to prevent a smooth merger, or cut the price at the expense of the State.

Independent intermediary agencies need to be employed through public bidding to assess State assets and the results should be reviewed by other professional agencies such as auditing firms, the article says.

(China Daily 07/21/2003 page4)


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