Hunting for China's SOE's

October 2004 China Briefing

In this issue we examine the search for acquisitions in China and specifically Hunting for State Owned Enterprises. With the Chinese government insisting all SOE's sell off their non-core subsidiaries, opportunities abound for foreign investors seeking to snap up their JV partners completely or even purchase outright Chinese factories. A major part of this is the asset valuation aspect and we look into this important subject in detail. The lead article “Procedures & Due Diligence When Acquiring Chinese State Owned Enterprises” is by Chris Devonshire-Ellis, Senior Partner, Dezan Shira & Associates, and deals with letters of intent, asset valuations, due diligence, negotiating the valuation, the Chinese regulatory bodies overseeing such transactions, and the procedures for public bidding and auctions in China. It concludes with the execution process of the acquisition, including the transfer of equity, the involvement of the Chinese State Administration of Foreign Exchange, and of re-investment tax benefits should you be making an acquisition from existing China entity profits. A useful procedural timetable is also included. A second article, kindly provided by James Woo, Associate Director of Chesterton Petty, details “Conducting Asset Valuations in China – Explaining the Chinese Appraisers Approach” and discusses details of Chinas assets appraisals industry, it’s characteristics, applicable standards, and the various methods used when evaluating assets in China. Regional Updates are also provided, with a piece on “Mainland Chinese Listed Companies In Hong Kong Scoring Low Rankings For Corporate Governance” by Chris Devonshire-Ellis; two features by Alberto Vettoretti, Regional Partner, Dezan Shira & Associates South China on “New Procedures for Setting Up Representative Offices in the Pearl River Delta” and “New Deadlines Given By The Shenzhen Tax Authorities In Respect of Individual Income Tax Registration”, Lulu Zhang, Regional Partner, Dezan Shira & Associates Shanghai on “Application Procedures For Obtaining A China Green Card”, and Sabrina Zhang, Regional Partner, Dezan Shira & Associates Beijing, concerning “Reviews of Available China Tax Incentives”.