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What are the current new rules on Foreign Mergers and Acquisitions?

China’s new rules on foreign M&A (as further explained below) do the following:

· Establish reporting requirements for certain politically sensitive (but vaguely defined) transactions;

· Tighten the definition of foreign-invested enterprises eligible for preferential treatment (in comparison with domestic invested companies);

· Add additional approval requirements for M&A transactions among companies under common control;

· Permit cross-border share swap transactions, subject to approval, and subject to employment of a PRC-registered M&A advisor;

· Reactivate, and perhaps expand the scope of, China Securities Regulatory Commission (CSRC) approval requirements for offshore listings of offshore companies, by apparently including all such companies that have participated in PRC M&A transactions; and

· Tighten supervision of such companies’ funds raised offshore.

These are among the changes that took effect from 8 September 2006 under the Rules on Acquisition and Merger of Domestic Enterprises by Foreign Investors, issued on 8 August 2006 jointly by the PRC Ministry of Commerce (MOFCOM), the State Assets Supervision and Administration of Commerce, the State Administration of Taxation, the State Administration of Industry and Commerce, the CSRC, and the State Administration of Foreign Exchange (SAFE).

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