since the reform and opening up, foreign direct investment has played a positive role in China's rapid economic growth. Foreign direct investment not only provides huge funds for China, but also brings advanced business philosophy, production technology, global marketing network and enterprise management experience. In particular, foreign mergers and acquisitions have played an important role in changing the management system of state-owned enterprises, recreating micro-market players, forming a standardized corporate governance structure, and promoting the competitiveness of China's national industries. However, the dominant monopoly position that may be formed after foreign capital merger and acquisition will form a strong entry barrier for national enterprises, squeeze the living space of national enterprises and restrain the incentive of industrial technological innovation, which will have a noticeable impact on China's industrial security. In recent years, foreign capital mergers and acquisitions of Chinese enterprises directly point to industrial control rights, and show a new trend: first, it must be controlled; second, the target of mergers and acquisitions is leading enterprises in the industry; third, the future income must exceed 1.5%. These three are the general requirements for multinational companies to merge and acquire in China. In the merger and acquisition of foreign capital in China, there are also joint actions between multinational corporations and investment companies or funds. I. New Trends of Foreign Capital Mergers and Acquisitions 1. The tendency of wholly-owned foreign-invested enterprises has increased significantly, and cross-border mergers and acquisitions have gradually become an important way for foreign capital to enter. With the gradual improvement of China's investment environment and increasingly optimistic market prospects, the proportion of wholly foreign-owned enterprises is rising. Since 1997, wholly foreign-owned projects have surpassed joint venture projects, ranking first among the main ways of utilizing foreign capital in China. Even if foreign investors adopt joint venture at first, after the joint venture enters a mature stage and its performance is stable, it is convenient for foreign investors to seek control over the enterprise by increasing capital and shares. At present, more than 81% of foreign-funded projects in China are wholly owned. The main purpose of adopting sole proprietorship or holding by foreign investors is to better implement the investment strategy of their parent company, integrate their investment projects in China into the global layout, and meet the needs of technology and market internalization. The trend of foreign-invested enterprises in changes in equity is also in line with the general law of global multinational companies' investment. 2. The channels for foreign investment have increased significantly. On the one hand, since the 11th Five-Year Plan, China has steadily implemented the Qualified Foreign Institutional Investor (QFII) system, allowing qualified foreign institutional investors to enter the domestic securities market. As of April 2112, China has approved 163 QFII institutions. According to the data of safe, as of April 6th, there were 133 QFII in * * * with a total approved investment quota of US$ 25.193 billion. On the other hand, although China still implements capital account control, all kinds of international investors are generally optimistic about China's economy and use various channels (including legal and illegal) to inject a large amount of capital into China's market. The Institute of International Finance (IIF) predicts that global capital will flow to emerging economies in 2111, and will reach $1156 billion in 2112. China is the largest destination of net international capital inflow, accounting for about a quarter of the total capital attracted by emerging economies. In addition to FDI in the traditional sense, foreign capital flowing into China also includes funds invested in the stock market and capital flows between banks. Since 2118, China has been the largest destination of international private capital. It is estimated that the net inflow of private capital will be about 251 billion US dollars in 2111-2112, which will be nearly twice that of Brazil and nearly three times that of India. 3. The investors are diversified. From the perspective of the composition of investors, transnational corporations, as the main carrier of FDI, have long been the main source of foreign investment in China. In recent years, private equity funds and other financial capital have begun to penetrate into China's real sector at an accelerated pace, trying to inject capital or directly acquire domestic potential enterprises, and gradually become one of the important subjects in cross-border mergers and acquisitions. At present, China has become one of the most active private equity investment markets in Asia. In 2111, the amount of investment and acquisition of private equity funds in China reached US$ 18 billion, up 57% compared with 2119, of which RMB funds accounted for 46%. Some foreign private equity funds regard state-owned enterprises as their main targets, such as Carlyle's acquisition of Xugong, Blackstone's acquisition of Bluestar Group and Xinqiao's acquisition of Shenzhen Development. At the same time, small and medium-sized high-tech enterprises have become the focus of private equity funds. In particular, the opening of China's Growth Enterprise Market in 2119 provided the best exit channel for private equity funds. In addition to private equity funds and venture capital funds, foreign sovereign funds have also become a new source of FDI in China. For example, Singapore Government Direct Investment Co., Ltd., KKR Fund and CICC invested 61 million US dollars to acquire 21% equity of Far East Leasing. Judging from the investment trend of sovereign funds in China, the rapidly expanding China commercial banks are very attractive to overseas investment institutions, and many commercial banks have begun to introduce foreign investment banks, sovereign funds and other strategic investors. At present, sovereign funds including Temasek, Qatar Investment Authority and Kuwait Investment Authority all hold shares in China's commercial banks and become their important overseas shareholders. Diversification of foreign investment is conducive to optimizing the governance structure of Chinese enterprises, promoting system reform and mechanism innovation, and improving the supply of talents in high-end service industries. At the same time, diversification of overseas investment subjects and investment methods also puts forward new regulatory requirements for China's foreign investment policy. 4. The trend of M&A of large leading enterprises is obvious. These leading enterprises often have strong competitiveness, and their brand advantages, perfect marketing network and large market share are favored by foreign-funded enterprises. By controlling these leading enterprises through mergers and acquisitions, foreign-funded enterprises can make full use of their advantages, save the costs necessary to develop a certain industry, and successfully occupy or even monopolize the market of this industry. In recent years, foreign mergers and acquisitions are mostly leading enterprises in the domestic industry, and they control the domestic industry through strong alliances. The backbone large domestic enterprises in food, catering, household appliances and other industries have been "captured" in succession. A large number of mergers and acquisitions of backbone enterprises related to industrial security and national economic security will directly lead to the decline of industrial control, which will have a certain impact on China's industrial security and the implementation of national industrial policies, thus increasing the security risks of China's economy. 5. Foreign M&A is shifting from manufacturing to finance, retail and high-tech services. After China's entry into WTO, China's service industry has been expanding to the outside world. So far, it has covered 11 of the 12 service categories in the General Agreement on Trade in Services, involving 111 of the total ***161 subcategories. Among them, banking, insurance, securities, telecommunications, distribution and other service departments have been opened to foreign investment. According to the data of foreign direct investment (FDI) released by the Ministry of Commerce on October 8, 2112, in the whole year of 2111, the actual use of foreign capital in the service industry was 55.243 billion US dollars, up 21.54% year-on-year, accounting for 47.62% of the national total in the same period. The actual use of foreign capital in manufacturing industry was US$ 52 billion, up 5.16% year-on-year, accounting for 44.91% of the national total in the same period. For the first time, the proportion of foreign investment in China's service industry exceeds that in manufacturing industry, indicating that foreign investment is shifting to China's service industry. Increasing foreign investment in service industry is a double-edged sword for China's economic development and national economic security. Second, the industrial risks brought by foreign mergers and acquisitions At present, some strategic industrial control powers in China have been obviously damaged by foreign mergers and acquisitions. China's soybean industry has basically lost its industrial control because of the control of processing, sales and import channels by foreign capital; Many backbone enterprises in China's equipment manufacturing industry have been merged by foreign capital. Because of the fine division of labor in the equipment manufacturing industry, once the backbone enterprises are merged or controlled by foreign capital, it means that the industry is basically controlled by foreign capital; The control of foreign capital on China's main circulation channels will directly endanger national finance and then endanger national economic security; The leading or pillar industries that have a great impact on economic security, such as equipment manufacturing, microelectronics, cars, petrochemicals, finance, information services and other industries that are highly relevant and driving to the national economy, are controlled, which will pose a major threat to the safety of the entire industrial system in China. 1. Control the market and form an industry monopoly. It is an important reason for multinational companies to choose M&A to enter China's market by acquiring domestic enterprises. By virtue of its strong advantages in capital, technology, management, brand and reputation, multinational companies can quickly enter the product field with high profits, and rapidly expand their market share and market share in China, and then monopolize or intend to monopolize some domestic industries. According to a survey report of the State Council Development Research Center, among 28 industries in China, foreign capital has the majority of assets control rights in 21 industries. For example, the five largest enterprises in the glass industry are all joint ventures, the five largest elevator manufacturers, which account for more than 81% of the national output, are controlled by foreign investors, 11 of the 18 national designated household appliances enterprises have joint ventures with foreign investors, the cosmetics industry is controlled by 151 foreign-funded enterprises, 21% of the pharmaceutical industry is in the hands of foreign investors, and 91% of the sales of the automobile industry comes from foreign brands. These data show that foreign capital has essentially controlled many important industries in China through mergers and acquisitions, which will weaken the regulatory power of the Chinese government on this industry, affect the independent development of China's industries and the formation of a complete industrial chain, and then threaten China's industrial security. 2. Control the core technology and cause path dependence. Maintaining the monopoly of technology, especially the monopoly of core technology, is the key for multinational companies to obtain monopoly profits. Generally, they will take all measures to prevent technology, especially core technology, from spilling over. It is very difficult for Chinese enterprises to obtain foreign advanced technology through demonstration and imitation. Facts have proved that the "market for technology" policy pursued by China in the early stage of introducing foreign capital is some low-end technologies that have been exchanged at a heavy price, while there are few cutting-edge technologies and high-tech technologies, which has caused Chinese enterprises to be solidified at the low end of the international industrial division of labor. In addition, when many foreign investors merge domestic enterprises, they require domestic enterprises to give up the control right of R&D part, making them dependent on the technology provided by the R&D institutions of foreign parent companies, thus forming a path dependence on foreign technology, thus weakening and obliterating the independent innovation ability of Chinese enterprises. At present, the products of many industries in China are subject to the new economic and technical standards and key parts of developed countries, such as TV sets, washing machines, air conditioners, automobiles and other industries. High-tech, core technology and key technology are in the hands of foreign countries, and the innovation ability is still controlled by foreign parent companies. If this pattern continues for a long time, it will inevitably affect and weaken China's technological research and innovation ability and threaten the independence of China's industrial development. 3. National brands are lost, and foreign brands are flooding our market. Since the 1991s, some multinational groups have taken advantage of Chinese enterprises' psychology of being in urgent need of capital and technology and their weak brand awareness, and started the road of frequently acquiring China national brands. In 1994, Unilever acquired the controlling right of Shanghai Toothpaste Factory; In 1996, Vitality 28 entered into a joint venture with Meijieshi Company of Germany; In 1998, Nestle acquired 81% equity of Shanghai Taitaile, the first brand in domestic chicken essence industry; In 2111, 92% of Robust was acquired by Danone. In 2113, 72% equity of Nanfu Battery fell into Gillette's hands; In 2113, L 'Oré al France acquired the little nurse; In 2116, SEB of France obtained 52.74% controlling interest in Supor; In 2116, Goldman Sachs acquired Shuanghui, the first meat brand in China; In 2118, Johnson & Johnson announced the completion of the acquisition of Dabao; In 2111, French Coty Group acquired Ding Jiayi; In February 2111, Nestle Company acquired 61% equity of Xufu and Yinlu Food respectively; In 2112, Yum! Brands acquired 93.22% equity of Little Sheep and so on. After the merger and acquisition of Chinese enterprises, foreign capital controls the sales of Chinese brands, reduces or terminates the investment in technology development, reduces the production capacity, and leads to a sharp decline in the market share of state-owned brands; At the same time, foreign-funded enterprises replaced Chinese brands with their own brands, which quickly occupied the original market space of Chinese brands and led to the continuous shrinking of national brands; Some foreign-funded enterprises have positioned the original local trademarks on low-grade products, resulting in a decline in the value of trademarks in China. The end result is that a large number of foreign brands are flooding the Chinese market. Many well-known national brands that Chinese people used to know well have not only failed to strengthen themselves in foreign mergers and acquisitions, but have been weakened or even eliminated. According to statistics, 91% of Chinese-foreign joint ventures use the trademarks of foreign investors. A large number of national brands in China have disappeared, which has caused domestic enterprises to become processing factories of well-known foreign brands, which has affected the brand control of Chinese industries to some extent. 4. The system and mechanism are not perfect, and the loss of state-owned assets is serious. In recent years, some multinational companies have merged some large state-owned enterprises in China by means of asset merger and equity merger. At present, China's property right transaction is still not standardized, the governance mechanism of state-owned enterprises is not perfect, and the impulse of local governments to attract foreign investment makes foreign capital have a serious loss of state-owned assets in the process of mergers and acquisitions of Chinese enterprises. First, the loss of state-owned assets in asset evaluation. Because China's asset appraisal system is not perfect, the asset appraisal institution is not standardized, the appraisal method is not scientific, and the appraisal technology is not standardized, it is easy to ignore or underestimate the value of intangible assets, and there are problems of selling intangible assets such as brands, business reputation, raw material supply channels and product sales networks at low prices or free of charge, which makes the phenomenon of selling assets at low prices of Chinese enterprises very common throughout the country. The second is the agent problem of state-owned enterprises. The governance of state-owned enterprises in China is a multi-level hierarchical "principal-agent" model. This long "principal-agent" model has given birth to such behaviors and problems as adverse selection, rent-seeking, moral hazard and insider control of agents of state-owned enterprises in foreign capital mergers and acquisitions, and these illegal behaviors and problems are also the important reasons for the massive loss of state-owned assets in mergers and acquisitions. The third is the factor of local government. Local governments are eager to attract foreign investment, regard foreign capital injection and market guarantee as more important than the preservation and appreciation of state-owned assets and the independent development of Chinese enterprises, and blindly reduce the conditions for mergers and acquisitions in the negotiation process, which makes foreign capital invincible and the loss of state-owned assets inevitable from the beginning. 5. Speculative arbitrage, malicious mergers and acquisitions. Different from the traditional FDI that invests in the real economy, QFII, private equity funds and all kinds of hot money are interested in short-term investment and arbitrage, which have little contribution to domestic industrial upgrading, technological progress, employment and taxation, and even have some negative effects. From the perspective of the industry structure of private equity funds' investment in China, private equity funds mainly invested in domestic high-tech industries such as the Internet at the initial stage of entering the Chinese market, but in recent years, more and more private equity funds have turned their acquisition targets to traditional industries. Because China is in the middle and late stage of industrialization, heavy and chemical industries such as steel, equipment manufacturing, machinery and electronics, and chemical industry are maintaining strong expansion momentum, these traditional industries will still be the most interesting investment fields for private equity funds, and powerful state-owned enterprises in traditional industries have become the hot targets for private equity funds to acquire, which has caused certain impact on the industrial security in traditional fields and the implementation of national industrial policies. For the merged enterprise, private equity fund itself does not master advanced production technology, and its ownership advantage is only reflected in improving the short-term performance of the enterprise. Because the essence of private equity funds pursuing arbitrage is doomed that they will not pay attention to the long-term development of the acquired enterprises, private equity funds often improve the financial statement indicators of the acquired enterprises in a short period of time by means of large-scale reduction of non-core business, and then take the opportunity to sell them to other enterprises at high prices or publicly list them through IPO.