On 9th October , the State Council of China issued a policy direction document, or an “Opinion”, to improve the quality of listed companies, including support for overseas M&A activities by listed companies. This is an important signal that the Chinese financial markets will open up further, specifically towards outbound M&A.
The “Opinion” supports Chinese listed companies to issue shares to purchase overseas high-quality assets. The “Opinion” also supports allowing more qualified foreign investors to make strategic investments in Chinese listed companies, in order to enhance the competitiveness of domestic public companies internationally.
This policy direction encourages institutional investors and long term value investors to participate more in M&A activities of listed companies, to improve various aspects of listed companies, including corporate governance, innovation, industrial upgrade.
Economists point out that the “Opinion” reflects the fact that more and more capital will flow into Chinese stock markets given the restrictions in real estate. Also it shows the Chinese government’s intension on improving the quality of listed companies and the stock market in general, to shift the focus of the stock market from fund raising to investing.