China loosened restrictions on mergers and acquisitions

China loosened restrictions on mergers, acquisitions and asset swap, fulfilling another attempt to rationalize the bureaucracy to promote trade in securities. Under the new rules listed on stock exchanges companies no longer need the approval of the China Securities Regulatory Commission (CSRC) in the purchase, sale or transfer of assets, provided that such transactions do not take place without the knowledge of body.

The new rules also allow the financial markets to play a greater role in the pricing of new shares. The new securities issued in mergers and acquisitions will have an impact on the market demand, and thus on their pricing. Under the new regulation, companies will have to disclose publicly, as the price/earnings (P/E) of its shares, and price/book value per share (P/B). China is also now allows listed companies to finance their mergers and acquisitions through a variety of instruments such as preference shares or private placement of convertible bonds.

“The amendment to the rules on mergers and acquisitions in response to the call of the government to reduce red tape and promote mergers. This is one of the most important changes in the economic structural change”, indicated by the CSRC. Beijing authorities also waive the minimum value of the shares to be sold by SMEs when they finance their mergers and acquisitions.