The main sectors contributing to the increase were financial services, manufacturing and retail. The largest announced domestic deal in 2006 was Gome's 61 per cent acquisition of China Paradise, its competitor in home appliance retailing, for US$677 million.

The Ministry of Commerce released new regulations on foreign M&As this August. But analyst Xie said the rules will not stifle dealmakers.

"Although large foreign buyouts are likely to face temporary delays in the approval process until the interpretation of new government policies and regulations is clarified, the implementation of the new policies and regulations will increase transparency and encourage further activity," Xie said.

Outbound investments announced in the 11 months also increased 61 per cent to US$14.1 billion, driven by large energy and resources deals.

"Outbound investment is likely to remain resource-focused, but strong policy support is likely to be tempered by an increasing realization of the risks that Chinese companies take on in outbound investment," said David Brown, a Hong Kong-based partner at PwC Transaction Services.

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