China will scrap rules that limit cross-regional mergers and acquisitions to promote consolidation and accelerate restructuring. That's according to the State Council, or Cabinet, on Monday.
In a statement on its website, the State Council said any rules that impede fair play should be removed. It included those designed by regional governments aimed at preventing outside companies from acquiring local firms.
Local governments have been a major obstacle in many cross-provincial merger deals because they fear losing tax revenue and other benefits. But the central government has long called on companies to consolidate into stronger enterprises, able to compete on a global scale.
Consolidation has progressed slowly in many sectors. In the highly fragmented steel industry, most of the deals were made in one province. One exception is Shanghai-based Baosteel Group - they have acquired rivals in Xinjiang and Guangdong.
In its statement, the State Council offers some appeasing solutions. For example, local governments may sign agreements to split tax income and other interests from companies formed through cross-regional M&A.
The Cabinet said the auto, cement, steel, machinery, rare earth and aluminum industries will be central for this type of M&A.
It also said the entry threshold will be eased for private capital in industries where it is not banned, such as infrastructure and financial services.