从体材上讲本文是典型的论文题材，以后讲到legal drafting时会用到。提醒大家看下最后的Conclusion，看作者分析后的结果何如。

Antony Dapiran

Introduction

The emergence of China as an international acquirer has been one of  the major stories in international business in this second decade of the  21st century. Over the past several years, Chinese companies have become increasingly active in making acquisitions globally,[1]  culminating in Chinese offshore oil company CNOOC Limited’s proposed  US$15.1 billion proposed acquisition of Canada’s Nexen Inc., which is  expected to be the largest outbound M&A deal by a Chinese acquirer  to-date.[2]  According to the Wall Street Journal, Chinese companies spent more than  US$10 billion in 46 deals to acquire U.S. companies in 2012, and an  additional US$23 billion worth of deals for Canadian companies.[3]

While privately-owned Chinese enterprises have been increasingly  active, it is the state-owned enterprises that have been leading the  charge, encouraged by Chinese government policy to “go out” and funded  by Chinese state-owned banks.

The rise of China’s appetite and capacity for making sizeable  overseas acquisitions has coincided with difficult economic conditions,  weaker foreign currencies against a stronger Renminbi, falling  valuations and, often, forced sales overseas. In these circumstances,  the prospects of a potential Chinese buyer for an asset – in other  words, the opportunity to “sell to China” – is an attractive one for  overseas sellers. This is even more so if sellers feel that they can  insert one or more eager Chinese bidders into an “auction” situation for  a company or asset, therefore fetching the sellers the highest price  and/or most favorable terms.

However, Chinese companies – and in particular state-owned  enterprises – are often uniquely mal-equipped to participate in an  international auction sale process. This is a result of a range of  regulatory, cultural and practical factors. Vendors looking to sell to  China need to be aware of these issues, and should structure their sale  process to maximize the likelihood that it will be navigable for Chinese  bidders and therefore hopefully maximize the price achieved for the  vendor’s assets.

Challenges for Chinese Bidders

For Chinese bidders, there are a number of challenges they face  participating in an international auction sale process, resulting in  their often not being able to compete on an equal footing with other  international bidders.

Domestic Regulators and Approvals

Chinese companies are subject to regulation by a number of  domestic regulators, whose approvals must be obtained for any overseas  acquisition. The key regulators and their respective areas of  jurisdiction include the following:

National Development and Reform Commission (NDRC): This is the  agency responsible for formulating China’s industrial policy, and is a  somewhat “marketized” version of the old State economic planning  agencies. NDRC approval must be obtained for any offshore acquisition by  a Chinese company. A filing with the NDRC must be made before a Chinese  bidder submits a bid for an overseas asset. NDRC review will generally  determine whether the acquisition is consistent with China’s overall  economic policies and the policies for development in the particular  industry.

Ministry of Commerce (Mofcom): Mofcom is the government ministry  with broad responsibility for domestic and international commerce.  Mofcom approval is also required for any offshore acquisition by a  Chinese company (including acquisitions by offshore subsidiaries of  companies that are ultimately Chinese controlled).

State-owned Assets Supervision and Administration Commission  (SASAC): SASAC is the government entity responsible for overseeing  State-owned enterprises and ensuring proper use of State-owned assets.  If an offshore acquisition is to be undertaken by a State-owned  enterprise, SASAC approval will be required. The main aim of this review  is to ensure that a State-owned enterprise is not “over-spending” or  using an offshore acquisition to dissipate State assets.

State Administration for Foreign Exchange (SAFE): The Renminbi is  not a fully-convertible currency, and currency controls remain in place  for capital account transactions. China’s foreign exchange regulator  SAFE must give approval for the conversion of Renminbi into foreign  exchange for the purposes of funding any overseas acquisition. This will  include approval for the conversion of Renminbi to fund any deposit  required to be paid in foreign currency.

Industry-specific regulators: In addition to the above regulators,  Chinese companies operating in particular industries are subject to  industry-specific regulators. These include, for banks, the China  Banking Regulatory Commission (CBRC), for insurance companies, the China  Insurance Regulatory Commission (CIRC), and other ministries for other  industries.

Any offshore acquisition by a Chinese company will need to navigate  this complex regulatory path to ensure a successful transaction. The  need to report frequently and in detail to these regulators affects the  information required by a Chinese bidder in the course of making an  acquisition, and the time required to respond to regulators’ requests  and obtain the necessary approvals at various stages through the process  (prior to submission of a bid, at the time of signing/paying a deposit  and prior to completion).

Complex Internal Bureaucracies

Not unlike the bureaucracies to which they report, Chinese companies  themselves have complex internal bureaucracies, with a decision-making  process characterized by lengthy chains of approval, much of which is  paper-based. This is invariably the case for State-owned enterprises,  which have evolved out of government bureaucracies, as well as many of  the larger privately-owned enterprises have modeled themselves on the  State-owned system and also operate similar internal hierarchies.  Coupled with the Chinese penchant for collective decision-making and a  desire to avoid individual responsibility, the result is a very slow  decision-making process that often cannot keep pace with the timetable  of an international M&A transaction, particularly an auction process  with strict deadlines coordinated across multiple bidders.

Different Approach to Risk Management

Chinese companies are often keenly aware of their lack of experience  in international markets, a point often emphasized by Chinese government  spokespersons, who remind Chinese businesses to conduct thorough due  diligence and to be aware of risks when doing business overseas.[4]  At the same time, like anywhere in the world, individual careers are  often riding on the success of a major acquisition. Accordingly, Chinese  purchasers tend be extremely thorough in their due diligence and  relatively risk-averse, demanding a thorough understanding of all  potential risks and related contingencies before committing to a  transaction.[5] This can cause further friction with a tight deal timetable.

Marketplace Mentality

International businesses negotiating with Chinese parties often  comment upon the marketplace “haggling” mentality with which Chinese  parties approach a negotiation.[6]  This deeply ingrained cultural approach to deal-making, with each party  opening with an extreme price and then gradually working their way  towards a mutually acceptable middle-point through a give-and-take  process of haggling, is the way negotiations are conducted in China,  from the vegetable market through to the boardroom. However, the  approach does not always translate well into international markets,  where Chinese bidders risk losing credibility if they are seen to be  coming in with “low ball” bids. In an auction situation, this may mean  that a Chinese bidder, by putting in an inappropriately low initial bid,  may fall at the first hurdle of expressions-of-interest and not even  proceed into the auction proper.

Minimal Involvement of Professional Advisors

Chinese companies have been slow to learn the value of professional  advisors, whether lawyers, accountants or financial advisors. Thus it  will not be unusual to find a Chinese bidder on an international M&A  transaction to be working without any professional advisors at all, or  at best advised by a one-man “consultant” or middle-man. This means that  an inexperienced Chinese bidder will not always be fully informed of  international market practices, deal dynamics, and how to work through  the auction process. The educational role in such cases may fall upon  the vendors themselves and their advisors.

Helping Your Chinese Bidders

Given the above challenges, what can international sellers to do  maximize the chances of having a Chinese bidder participate meaningfully  in their sale process?

The first step is clearly an increased awareness of the challenges  facing a potential Chinese bidder, including the factors outlined above.  An understanding of why, for example, a Chinese party comes in with an  initial bid that appears insultingly inadequate, or has trouble meeting  the milestones in an auction timetable, will allow vendors to at least  consider how to deal with the challenges and/or allow for flexibility in  the process to accommodate Chinese bidders.

An understanding of the PRC regulatory approval process is also  essential, not just for purchasers but for vendors also. If a vendor  envisages having a PRC purchaser, it should obtain independent advice on  the approval process that purchaser will face (and not just rely on the  PRC party’s representations on this issue). The vendor should consider  break fees, deposits or an appropriate adjustment in valuation to  account for the inherent regulatory risk in having a PRC purchaser.

International sellers should also be aware that it is not realistic  to have a genuinely competitive sale process involving two PRC bidders –  the NDRC and other PRC regulators will generally step in to select  their preferred Chinese bidder to participate in the process alone, to  avoid the (to Chinese government minds) undesirable result of having two  Chinese companies bidding the price up against one another.

International sellers should provide as much information as possible  to their Chinese bidders during the due diligence process, to give them  plenty of time to digest the information, and should be prepared for  extensive follow-up questions and discussions as the Chinese parties  seeks to address their risk concerns.

Finally, international sellers should be prepared for frequent and  lengthy delays for even seemingly minor decisions in the sale process as  the matter winds its way through the convoluted bureaucracies of both  the regulators and the company itself.

Conclusion

As Chinese businesses gain experience in international business  transactions and become more sophisticated, many of the “quirks” in  dealing with Chinese purchasers will disappear. Indeed there are some  Chinese companies – just a couple of examples include CNOOC among the  State-owned enterprises and Wanxiang among the private enterprises – who  already have extensive international deal-making experience and operate  seamlessly in international markets. However, it will be some time  before Chinese companies generally have the kind of extensive  deal-making experience of these veterans. In the meantime, sellers  wishing to maximize their prospects of selling to China will need to  strategize accordingly.

Preferred citation: Antony Dapiran, Selling to China, 3 Harv. Bus. L. Rev. Online 76 (2013), http://www.hblr.org/?p=3015.

* Antony Dapiran is a partner based in the Hong Kong office of  international law firm Davis Polk & Wardwell LLP. He regularly  advises Chinese companies on international transactions, including  securities transactions and offshore acquisitions.

[1] See report published by Deloitte, “The Resurgent Dragon:  Searching for value in troubled times – 2012 Greater China outbound  M&A spotlight” available at:  http://www.deloitte.com/view/en_CN/cn/services/csg/eb80ac5b279fa310VgnVCM1000003156f70aRCRD.htm#  (accessed 19 February 2013).

[2] Benoit, David, “Cnooc-Nexen: Where the $15.1 Billion Deal Ranks in History”, Wall Street Journal,  23 July 2012 at  http://blogs.wsj.com/deals/2012/07/23/cnooc-nexen-where-the-15-1-billion-deal-ranks-in-history/  (accessed on 19 February 2013).

[3] Trelep, Sharon, “China Steps Up Buying in U.S.”, Wall Street Journal, 8 February 2013.

[4] See, for example, Wang Qishan’s remarks in 2009, reported in,  amongst others, Rabinovitch, Simon, “Unscripted reply shows China’s  foreign M&A caution”, Reuters, 12 March 2009, available at:  http://www.reuters.com/article/2009/03/12/china-investment-prudence-idUSPEK32476120090312  (accessed 19 February 2013).name=”_ftn

[5] Zhang, Zigang, “Cross-cultural challenges when doing business in China”, Singapore Management Review, January 2004.

[6] See, for example, Graham, John L. and N. Mark Lam, “The Chinese Negotiation”, Harvard Business Review, October 2003.