International companies vying for a piece of China's growth have hit unexpected trouble in the form of "economic nationalism" and foreign dominance fears, state media said yesterday.
A broad coalition of officials and businesspeople have voiced concern that massive sales of China's assets could lead to foreign monopolies in key sectors, the China Daily Business Weekly newspaper reported.
"If China lets multinationals' malicious mergers and acquisitions go ahead freely, China can only act as labor in the global supply chain," said Li Deshui (李德水), China's former chief statistician, according to the paper.
The mood change has come about due to a combination of national pride and protectionist urges, partly in response to growing US and EU resistance to low-cost exports, the paper said.
The more patriotic atmosphere may already have thrown a number of important acquisitions into limbo, the paper said.
It cited plans by the US' Carlyle Group to buy Xugong Group (徐工集團), China's largest construction equipment maker, for 3 billion yuan (US$370 million), in the nation's largest private equity buyout yet.
The deal has stalled, and people familiar with the situation suggested the commerce ministry was refusing to approve it unless Carlyle promised not to sell its stake to another foreign group in the future, the paper said.
If the new less welcoming sentiment persists, it will happen at an awkward time in China's growing economic interaction with the rest of the world.
Many foreign investors now prefer acquisitions of existing Chinese enterprises rather than Greenfield investments, where operations have to be built from scratch, because it saves time.
China reported US$66 billion worth of mergers and acquisitions last year, up 12 percent from the year before, making it number one in Asia outside Japan.
Significantly, in the same period foreign Greenfield investment fell 0.5 percent to US$60.3 billion, according to government figures.
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