Investors in China have plenty to read (and worry) about these days (see more here  about changing attitudes to foreign investment). In the latest round, we have news about an anti-privatization lobby, and the continuing problems for private equity investors.
A story carried by AP, notes that there is a growing movement to protect state assets as a tool for managing the economy and providing social benefit, and to oppose the new Property Law . A petition from scholars and retired officials notes:
“With the unceasing advance of privatization, our country already has a serious gap between rich and poor, which is polarizing into two extremes”.
Although the petition seems not to have official support (AP notes that various websites that carried it have been blocked) it is a reminder of ongoing debate (and division) as China grapples with how best to develop its “harmonious society ”.
The role of foreign money is also in the frame, and we have seen plenty of news about Carlyle’s battle for Xugong (ending in much-reduced bid, which is still being discussed). The FT reports that some private equity investors have taken note of the change in attitude that the government has to their wads of crisp bank notes:
“In early December, Goldman Sachs announced three investments involving acquisition of minority stakes in companies with A-shares listed on China’s stock exchanges through private placements: Fuyao Glass, an automobile windscreen manufacturer, Midea Electronics Appliance, a household electrical appliances manufacturer, and Chengdu Yangzhiguang, maker of aluminium foil…
In each case, Goldman Sachs agreed to acquire about a 10 per cent stake, the statutory minimum for foreign “strategic investments”, and to pay close to the minimum price, which is 90 per cent of the 20-day historical trading average price before announcement of the deal. These investments require the approval of the Ministry of Commerce and the China Securities Regulatory Commission. Under Chinese law, Goldman Sachs’s A-shares will be subject to a three-year lock-up…
Last November, H&Q Asia Pacific announced the completion of its $45m acquisition of a 43.3 per cent stake in Yuchai Engineering, a leader in the small-sized excavator industry in China, after obtaining all relevant government approvals.”
So minority stakes may be less threatening and more palatable, especially when dealing with leading companies. However, as the FT points out, there are examples of bigger, majority deals (eventually) getting through – such as the US$325 million acquisition of the meat processing group Shineway by Rotary Vortex .
The key seems to be in the strategic (or otherwise) nature of the target (from the Chinese perspective). Future targets will likely be picked cautiously. As ever – watch policy announcements with interest, and do not ignore the competing agendas that are being argued about behind closed doors.
See news sources:
In China, a Move Against Privatization 
Washington Post – Washington,DC,USA
BEIJING — A group of Chinese scholars and retired officials has petitioned China’s legislature to halt the privatization of state companies, arguing it has …
Legal View: When equity is difficult to buy 
By Andrew Whan