Reforms help facilitate more M&A activity

China's stepped-up reforms to encourage mergers and acquisitions will provide strong support for industrial upgrading despite external challenges, while further efforts can be made to enhance the campaign, said a political adviser and veteran investor.

"The country's recent policy signals regarding the capital market emphasize market stability, deepened reforms and risk prevention, reflecting a clear and positive direction for investors," said Zhang Yichen, a member of the 14th National Committee of the Chinese People's Political Consultative Conference, the country's top political advisory body.

"Against the backdrop of challenges in China-US investment relations, these policies will provide strong support for private tech enterprises, helping them play a greater role in independent innovation and industrial upgrading," said Zhang, who is also chairman and CEO of CITIC Capital Holdings Ltd, a leading alternative investment management and advisory firm.

Notably, Zhang highlighted the significance of the "M&A Six Measures", which promotes industrial upgrading and innovation by directing capital toward emerging industries and key technological fields, and allowing well-regulated listed companies to engage in cross-sector acquisitions and purchase high-quality but unprofitable assets.

The enhanced regulatory inclusiveness under the new policies will help resolve valuation challenges in M&As, particularly for companies listed on Shanghai's STAR Market, Zhang said in an exclusive interview with China Daily.

In September, the China Securities Regulatory Commission issued opinions on deepening the reform of listed company M&As and restructuring, rolling out six measures to encourage M&As by listed companies, also known as the "M&A Six Measures".

This year's Government Work Report further vowed to reform and improve the procedures for enterprise mergers, acquisitions and reorganization, as part of efforts to deepen comprehensive reforms for investment and financing in the capital market.

Zhang stressed the need to break certain regulatory bottlenecks in the implementation of the policies to encourage M&As to maximize financial support for high-quality development.

He proposed adjusting solvency regulations for insurance companies to gradually expand their equity investment capacity, particularly in areas aligned with national strategic priorities and investments with stable cash flow and predictable returns, including M&A funds and secondary funds.

M&A funds are private equity investment funds specifically designed to finance mergers, acquisitions and corporate restructuring. Secondary funds — also called S funds — operate in the secondary private equity market, where they buy existing stakes in private equity funds or direct investments in companies.

At a news conference during this year's two sessions, CSRC Chairman Wu Qing also stressed the need to refine the support mechanisms for the "M&A Six Measures".

Wu highlighted plans to address bottlenecks in valuation, approval processes and payment tools, aiming to optimize resource allocation, promote corporate growth, and facilitate more M&As in the tech innovation sector, particularly those with exemplary significance.

Additionally, Wu pledged to support the development of S funds and M&A funds, further diversifying their exit channels and expanding funding sources for such funds.

In addition, Zhang emphasized the immense potential of artificial intelligence integration with traditional industries, particularly in smart manufacturing, healthcare and fintech.

"Currently, China is witnessing a surge of startups in sectors such as semiconductors, AI and robotics. From an industrial development perspective, achieving large-scale growth will require consolidation through organic expansion and M&As. CITIC Capital will actively participate in this process.

"Through capital empowerment, resource integration and strategic guidance, we aim to accelerate corporate growth, facilitate tech commercialization and support industrial upgrading, ultimately contributing to China's high-quality economic development," Zhang said.