Recent Chinese Buyout Activity and the Implications for Wider Global Investment Rules

Abstract

We discuss recent cases of Chinese buyout activity in the Organisation for Economic Co-operation and Development (OECD; especially in the United States and European Union) in resource and manufacturing sectors. While most of the buyout attempts have been unsuccessful, they serve as a catalyst for a wider discussion on the implications for global arrangements for cross-border acquisitions. Three specific issues are raised. The first is subsidization through low- or no-interest loans by the Chinese Central Bank to companies investing abroad. The second is the transparency of entities involved in buyout attempts. Most Chinese companies have close ties to multiple levels of government and are not subject to the standard reporting required of OECD companies. The third involves national security concerns in OECD countries and the possibility of China acquiring sensitive technology when Chinese companies purchase companies abroad. These issues have not been addressed in existing OECD and World Trade Organization investment policy initiatives, and have yet to be discussed in the global forum.

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