A Hong Kong newspaper quoted an insider and revealed that China is drafting relevant statutes to regulate foreign capital's merger and acquisition (M&A) in the equipment manufacturing industry and restrict the investment scope of foreign funds as well.

The insider indicated that the new regulation will define a group of industries and enterprises under prior protection, including key companies engaged in shipbuilding, power generation equipment manufacturing and petrochemical general equipment manufacturing. China will not allow foreign investors to become controlling shareholders in these companies and focus on inspecting joint ventures and M&A activities in the above areas.

At the same time, China will amend the "Catalogue for the Guidance of Foreign Investment Industries" which is the basis of foreign investment, shrink the coverage of encouraged catalogues and make some changes in restricted catalogues.

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