CHINA has moved to have foreign investment in the industrial machinery sector approved by the Government, and this could raise new complications for two planned acquisitions by US companies.
Carlyle, a private equity group, and Caterpillar, a construction equipment company, have both made bids for Chinese makers of construction machinery and both have been held up by regulatory delays.
The announcement follows a period of criticism in Beijing of growing incursions by foreign companies into areas of the economy considered strategic.
In October, Carlyle agreed to pay $US375 million (about $514 million) for an 85 per cent stake in Xugong Construction Machinery, part of the Xuzhou Machinery Group, though the deal has yet to be approved by the Ministry of Commerce.
Caterpillar's bid for Xiamen Engineering Machinery has been held up by disagreements over control of the state-owned company.
Although the implications of the new policy are unclear, the two deals may now face a new regulatory hurdle.
"Large and key equipment manufacturing companies must seek opinions from the relevant departments of the State Council (China's cabinet) when selling shares to foreign companies," a Beijing official said.
The announcement is part of a broader initiative to encourage strong home-grown companies in the machinery industry.
The State Council highlighted 12 segments it wanted to develop, including high-efficiency power generators, digital control systems for aircraft, more efficient tractors and combine harvesters, and boring machines used in construction.
The main products of the Chinese companies - which include mobile cranes in the case of Xugong and loading machinery for Xiamen Engineering - are not on the list of segments highlighted by the State Council.
Carlyle refused to comment on the announcement, though a source said large takeovers were usually monitored by the State Council, so the new policy did not alter the situation significantly.
The Carlyle bid, which would be the largest private equity deal in China, came under attack after Sany Heavy Industry said it would offer a premium for Xugong to keep the company in Chinese hands.
Carlyle, a private equity group, and Caterpillar, a construction equipment company, have both made bids for Chinese makers of construction machinery and both have been held up by regulatory delays.
The announcement follows a period of criticism in Beijing of growing incursions by foreign companies into areas of the economy considered strategic.
In October, Carlyle agreed to pay $US375 million (about $514 million) for an 85 per cent stake in Xugong Construction Machinery, part of the Xuzhou Machinery Group, though the deal has yet to be approved by the Ministry of Commerce.
Caterpillar's bid for Xiamen Engineering Machinery has been held up by disagreements over control of the state-owned company.
Although the implications of the new policy are unclear, the two deals may now face a new regulatory hurdle.
"Large and key equipment manufacturing companies must seek opinions from the relevant departments of the State Council (China's cabinet) when selling shares to foreign companies," a Beijing official said.
The announcement is part of a broader initiative to encourage strong home-grown companies in the machinery industry.
The State Council highlighted 12 segments it wanted to develop, including high-efficiency power generators, digital control systems for aircraft, more efficient tractors and combine harvesters, and boring machines used in construction.
The main products of the Chinese companies - which include mobile cranes in the case of Xugong and loading machinery for Xiamen Engineering - are not on the list of segments highlighted by the State Council.
Carlyle refused to comment on the announcement, though a source said large takeovers were usually monitored by the State Council, so the new policy did not alter the situation significantly.
The Carlyle bid, which would be the largest private equity deal in China, came under attack after Sany Heavy Industry said it would offer a premium for Xugong to keep the company in Chinese hands.
