China’s National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) have eased antitrust regulations on China-based GPs making overseas investments.
On October 6, China’s current overseas pre-approval and pre-filing merger regime will be replaced with one that sources say should take less time and be less burdensome. The most significant change introduced by the NDRC and the MOFCOM is simplifying the notification procedure and delegating power from central government authorities to provincial or municipal authorities, legal sources tell pfm.
However, some market sources say that it remains tentative as to how effective delegating more approval and filing authority to local regulators will be in practice.
This is because the new measures still retain the long-held principle that any and all outbound investments by Chinese companies must be subject to at least some level of prior review by the Chinese authorities.
For instance, the NDRC retains the requirement that a Chinese acquirer must submit an information report and obtain a confirmation letter from the NDRC (known as a ‘Road Pass’) before undertaking any binding offer or signing a binding acquisition agreement in connection with any outbound Chinese investment of $300 million or more.
“It is well known that the Road Pass and pre-approval requirements put Chinese firms at a disadvantage in M&A bidding,” said one Hong Kong-based lawyer. “The changes will improve this to some degree but the streamlined review and approval periods still mandated by the new rules may prove ephemeral in practice.”