In a direct contradiction to China’s merger and acquisition policy of 2007 and 2008, China National Offshore Oil Corporation (CNOOC) declared that it would not be seeking any new oil acquisitions until the financial crisis ebbs. The company would instead work towards forming new partnerships with foreign companies, rather than buy them out completely.
A Quick Change
Throughout China’s stock market boom, Chinese firms were able to easily leverage up to buy out other firms. The process was made easier by higher stock prices and ease of credit, which allowed Chinese companies to buy out their foreign counterparts at depressed prices. Now that buyouts have been ruled out as an option, agreements between Chinese companies and others will likely include options to buy mineral rights and other land agreements to mine or remove commodities from the ground.
A New Direction
The new direction in possible Chinese agreements with foreign firms allows China to escape much of the anti-monopoly and foreign purchase laws that are now stifling its growth. Legislation from countries all over the world has made it significantly more difficult for Chinese companies to purchase rivals overseas. And nations have reason to be worried; Chinas $1.5 trillion in foreign reserves were tapped a number of times to complete acquisitions, and the future for buyouts is that the foreign reserves will be used to complete deals. Although the new deals are likely to be less intrusive than they were previously, other countries are not taking any chances.
Growing Concern over Nationalism
Each recession and depression is marked with periods of both nationalism and protectionism in trade. To circumvent the problems associated with inter-government policies, all nations will have to take a hard line stance in regards to what mergers and acquisitions are and are not acceptable.