The number of mergers and acquisitions (M&A) in the A-share market in China (targeting domestic investors) increased by 63% in the first half of this year compared to the same period last year. This result is attributed to the government's easing of M&A regulations and financial support measures that began last year, suggesting that the Chinese government is utilizing M&A as a key means for industrial restructuring and transitioning to new growth drivers.
According to the local big data analysis platform, RuiShou (睿兽分析), the number of M&A transactions in China during the first half of this year was recorded at 1,113. The transaction size reached 509.2 billion yuan (approximately 99 trillion won), marking a 63% increase compared to the same period last year. Transactions were concentrated in advanced manufacturing and new industry sectors such as computers, automotive manufacturing, biotech and pharmaceuticals, semiconductors, and new materials.
Xu Minshui, a partner at the Chengluo Investment Management Center, noted in Securities Daily that "given the rapid changes in technology and intensifying competition, it is challenging to secure technological capabilities purely through endogenous growth in the short term," adding, "M&A is a key pathway to efficiently acquire core technology. Particularly, acquisitions in new industry fields provide corporations with opportunities to open a second growth curve."
In fact, Debang Technology (德邦科技), a high-tech materials and semiconductor company located in Yantai, Shandong Province, acquired 89% of the equity of TaiJiNuo (泰吉诺), a new materials company, in February this year. This acquisition allowed Debang Technology to rapidly expand into the advanced packaging sector, leading to significant revenue growth. Debang Technology's revenue for the first half of the year was 690 million yuan (approximately 134.6 billion won), a 49% increase compared to the same period last year, with net profit soaring 35% to 45.57 million yuan (about 8.9 billion won). Securities Daily analyzed that over 8% of the total revenue was directly driven by the acquisition of TaiJiNuo.
The rapid activation of the M&A market in China is attributed to the support from central and local governments. The China Securities Regulatory Commission (CSRC) announced policies last September to support corporate M&A and ease related regulations. Following that, various regions such as Beijing, Shanghai, Guangdong, and Sichuan introduced supporting policies and measures. This year, simplification of reviews, innovations in payment methods, and encouragement of participation from private equity funds have further reduced costs and difficulties. On the 20th, the Financial Supervisory Service announced the 'Commercial Bank M&A Loan Management Measures,' aimed at facilitating loans related to M&A, indicating a supportive stance from the financial sector.
The Chinese government's initiative to activate M&A is aimed at facilitating industrial restructuring and addressing overproduction issues. The government has set 'industrial upgrading' (转型升级, transition from low-value-added manufacturing to high-value-added high-tech industries) and 'transition of new and old growth drivers' (新旧动能转换) as policy goals. The government seeks to utilize M&A as a means to consolidate outdated industries and allocate resources to emerging sectors. Furthermore, facing a situation where the number of corporations is excessively high, creating overly intense competition that results in overproduction and declining profitability, the government believes that promoting industrial reorganization around large corporations can improve overproduction and enhance supply chain efficiency.
A notable example is the absorption merger of China's top two shipbuilders (state-owned enterprises), which took place in mid-month. The number one firm, China Shipbuilding, and the number two firm, China State Shipbuilding Corporation (CSSC), are both subsidiaries of the CSSC Group. Reportedly, these companies engaged in mutually detrimental competition, leading the Chinese government to decide on the merger to reduce losses from competition and maximize profits. The Chinese economic media outlet Caixin evaluated the merger as a "key measure to resolve the 'involution' ('内卷', an internal competition that undermines oneself) competition in ship orders between China Shipbuilding and China State Shipbuilding Corporation."