China’s Slowdown in Approving US Companies’ Mergers

The relationship between the United States and China has been deteriorating in recent times, with a technology war currently at the forefront. The United States encouraged China to set up a robust antitrust regime, but now, China is holding back its required green light for mergers that involve American companies. This delay is seen as part of the ongoing technology war.

2. Pre-conditions for Approving Transactions
   Chinese regulators have recently slowed down their merger reviews of a number of proposed acquisitions by U.S. companies. To approve some of the transactions, officials at the State Administration for Market Regulation, China’s antitrust regulator known as SAMR, have asked companies to make available in China products they sell in other countries. This is an attempt to counter the United States’ increased export controls targeting China.
3. Multinational companies
   For multinational companies, it doesn’t take much for a merger to trigger a Chinese antitrust review. For instance, if two companies in a deal have revenue of more than $117 million a year from China, the merger needs Beijing to sign off.
4. Beijing’s Leverage
   Beijing has increasingly leveraged its merger-review process and antimonopoly rules to advance its political and economic goals. While Chinese regulators rarely reject transactions outright, they have resorted to delaying and withholding approvals until their demands are met. Such tactics are gaining traction as China and the United States are embroiled in an intensifying great-power competition.
5. Beijing’s Motivation
   Chinese officials see merger reviews as a relatively subtle and low-cost way to pressure foreign companies and, by extension, their governments. By comparison, Beijing has been wary of using its version of a Washington export blacklist known as the entity list, which could bar foreign companies from selling in China, for fear of hurting its access to foreign technology even more.
6. Recent Activities
   China has slowed down its economy, and Chinese authorities are cautious about throwing too many punches at a time when Beijing needs to keep foreign capital from leaving. Beijing has recently opened a cybersecurity review of imports from chip maker Micron Technology Inc., detained an employee of Japanese drugmaker Astellas Pharma Inc., and raided the Beijing office of U.S. due-diligence company Mintz Group.

Beijing’s slowdown in approving US companies’ mergers is part of its expanding toolbox of economic coercion, and it is seen as a relatively subtle and low-cost way to pressure foreign companies and governments.