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Carlyle reduces Xugong bid again

By Wan Zhihong (China Daily)
Updated: 2007-03-20 08:59

Some analysts said China could lose its technology to foreign competitors if important firms like Xugong were sold to overseas companies.

They also said selling off a major firm like Xugong to a foreign company may hurt China's economic security.

Last August, theMinistry of Commerceand other authorities issued new rules on the acquisition of Chinese enterprises by foreign investors.

The new rules, which took effect on September 8, state that such acquisitions must be approved by central authorities in three cases: if the foreign bidder has a market share of more than 20 percent and annual sales in China of more than 1.5 billion yuan; if the market share of one of the parties to the deal reaches 25 percent after the acquisition; or if the foreign bidder has acquired more than 10 Chinese enterprises in one year.

Carlyle has already made a concession in its bid for Xugong, cutting its initial proposed stake from 85 to 50 percent.

The Chinese government is considering several other cases, such as the proposed $269 million purchase of part of Laiwu Steel Corp by Arcelor Mittal, the world's biggest steelmaker. Arcelor agreed last February to buy 38.41 percent of Laiwu, based in easternShandongProvince.