The Seventh China Competition Policy Forum, held in Beijing from 31 July to 1 August 2018, marked the 10th year of China's Anti-monopoly Law enforcement and drew senior officials, academic practitioners, company executives and others from various competition agencies and international organisations.(1) Despite the background of an escalating trade war between China and the United States, the event was held in the spirit of harmony and global consolidation for antitrust policy and enforcement.

In addition to this growing consolidation, China's rise to prominence as an antitrust regime of major importance for companies engaging in global M&A activity has granted it considerable leverage to influence the landscape of the industries in which its domestic companies and 'national champions' participate. In this regard, it now ranks along with the United States and Europe as one of the most important antitrust hurdles for companies to navigate.

Recent events

However, recent events have raised the prospects for greater activism by the national regulators in determining whether a merger or acquisition should go ahead and if so, on what conditions. The stakes have been raised further by recent US measures to reform the powers of the Committee on Foreign Investments in the United States (CFIUS). CFIUS is the same government regulatory body that helped to block Singaporean company Broadcom's proposed acquisition of US giant Qualcomm in what would have been the world's largest technology merger to date, since it was not clear that Broadcom would preserve Qualcomm's competitive initiative against China's Huawei in 5G technology.(2) This is in keeping with the US pursuit of a comprehensive wireless strategy under the Federal Communications Commission initiative of "Leading the World Towards a 5G Future" – a goal that is also high on the Chinese agenda.

Even more recently, the passing of the Foreign Investment Risk Review Modernisation Act 2018(3) has seen CFIUS gain further new powers, which – once they come into full force – will extend its remit in M&A processes involving foreign entities. Among other reforms, the definition of 'covered transactions'(4) is expanded to include actions such as adding a member to a company's board of directors to the list of actions which would trigger a CFIUS review on grounds of national security, even for essentially passive investments. In addition, all partnership agreements for transactions with foreign entities must be disclosed to CFIUS, including individual side agreements that may contain rights to access data or intellectual property.(5) This increased scrutiny is likely to further stymie previously high levels of Chinese foreign direct investment – particularly venture capital funding – in the sensitive US technology sector.

Security measures

China is also taking measures to protect its security and development imperatives. The China State Council recently issued measures on the transfer of intellectual property to foreign investors, according to which the Chinese government will focus on the impact of overseas IP rights transfers on national security and the development capabilities of certain key industries in China. Further, the former National Development and Reform Commission reportedly stated that its priorities for 2018 included tackling antitrust violations involving intellectual property and keeping close tabs on high-tech manufacturers, such as manufacturers of storage chips for mobile phones.(6) IP protection and maintaining fair and competitive markets are therefore key considerations for allowing Chinese companies to compete effectively – especially in new technological fields that carry great potential for expansive industrial application going forward (including the telecoms, semiconductor and automotive industries) and in technological standard setting and licensing.

As such, the potential consequences of a foreign merger or acquisition for its own major domestic companies and markets is bound to come under scrutiny by regulators. Technology sectors are particularly susceptible to arbitrary discriminatory behaviour by undertakings, since patents may be withheld or unfairly bundled, or excessive royalties or price rises far beyond reasonable increases in cost applied. Google's purchase of Motorola Mobility for $12.5 billion was approved by the Ministry of Commerce (MOFCOM) in 2012 on the condition that Google commit to licensing its Android operating system free of charge and pledge not to discriminate among handset makers.

More recently, the $18 billion purchase of Toshiba's semiconductor chip division by a consortium including US private equity house Bain Capital and South Korean semiconductor company SK Hynix was held up pending MOFCOM approval. This came amidst a background of inflammatory US rhetoric on trade and concerns surrounding SK Hynix's involvement, despite the acquisition having been approved by all required regulators except MOFCOM at the time.(7) It is also notable that major Chinese technology companies Huawei and Lenovo are both reliant on the supply of these chips. The deal was subsequently approved in May 2018.

Similarly, delays were subsequently encountered in the proposed acquisition of Netherlands-based NXP Semiconductors by Qualcomm, in a deal that would have combined two of the leading players in the semiconductor industry. Despite the European Commission conditionally clearing the deal on 18 January 2018, MOFCOM – as the last remaining antitrust regulatory clearance – requested that the filing parties withdraw and re-file twice. There may have been several reasons behind this, but the decision making process was effectively halted shortly thereafter when the US Department of Commerce imposed a seven-year ban on sales of US components to Chinese telecommunications giant ZTE Corporation. As ZTE is reliant on critical chipset supplies from US companies including Qualcomm, it was expected that this could have the effect of hindering China's 5G expansion efforts. On 12 May 2018 President Donald Trump stepped in to propose rescuing ZTE and MOFCOM subsequently resumed the review process. Despite this, Qualcomm finally pulled out at the end of the agreed deadline of 25 July 2018,(8) incurring a termination fee of $2 billion in cash to NXP in the process.


These cases are among the most recent indicators of the wider-reaching significance that Chinese antitrust assessments and clearances now have in shaping global markets and aligning with development imperatives, and in their geopolitical leverage.

In addition to this, the Anti-monopoly Bureau responsible for reviewing mergers is now part of the recently consolidated State Administration for Market Regulation, which itself falls under the umbrella of the State Council as a source of decision making on merger activity.(9) As such – and under conditions of heightened tensions with the United States – Chinese antitrust merger control looks set to continue to play an increasingly influential role in shaping global markets.

For further information on this topic please contact Hao Zhan, Ying Song, Stephanie Wu Yuanyuan or Sharif Hendry at AnJie Law Firm by telephone (+86 10 8567 5988) or email (,, or The AnJie Law Firm website can be accessed at




(3) Through its incorporation into – and the subsequent passing by the Senate – of the National Defence Authorisation Act for Fiscal Year 2019 on 1 August 2018.

(4) 'Covered transactions' are defined by statute as mergers, acquisitions and takeovers by or with any foreign entity that could result in foreign 'control' of a US business.






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