Rewriting China’s Foreign M&A Rulebook
MOFCOM’s Accelerated Revision of the 2006 M&A Rules: Legal Framework, Policy Signals and Practical Implications
On July 23, 2026, MOFCOM stated at a State Council Information Office press conference that it would accelerate the revision and issuance of the Provisions on the Acquisition of Domestic Enterprises by Foreign Investors (the “M&A Rules”) in the second half of the year. The commitment follows the June 2026 Action Plan for Stabilizing and Optimizing the Utilization of Foreign Investment (the “Action Plan”) and targets a rulebook first issued in 2006, before the Foreign Investment Law, the Negative List, the security review regime and the information-reporting system existed. As of mid-October 2026, we have not located a published draft or final text. This note sets out the existing framework, what the Action Plan signals about the revision, and what deal teams can do in the meantime.
I. The Policy Signals
The revision is anchored in the Action Plan, issued jointly by MOFCOM, the NDRC and the Ministry of Finance (Shang Zi Fa [2026] No. 97), dated June 16, 2026 and publicized on June 22. Its fifteen measures were developed with 27 departments and respond to weak inflows: actual FDI use fell 7.5% year on year in January–November 2025, although the first half of 2026 showed a recovery, with RMB 402.14 billion of actual FDI, new foreign-invested enterprises up 5.3% and high-technology inflows up 33.2%.
Measure (4) in the Action Plan, on improving the administration of foreign M&A, makes two commitments: (i) to accelerate the revision and issuance of the M&A Rules, optimizing M&A procedures and consideration-payment requirements and strengthening coordination among regulators; and (ii) to allow qualified foreign equity investment institutions to act as strategic investors in securities offerings by listed companies in non-related industries. Three neighboring measures matter for deal work: Measure (15) (overhauling the information-reporting system and sharing its data with foreign-exchange registration, administrative licensing and fixed-asset investment authorities), Measure (10) (national treatment and fair-competition review) and Measure (5) (scenario-based data-export negative lists and industry catalogs of “important data”). On July 23, the head of MOFCOM’s foreign investment administration department repeated that accelerating the M&A Rules revision is a second-half priority.
II. The Existing Framework and Its Pressure Points
Foreign acquisitions of Chinese companies are governed by overlapping instruments of different vintages:
Instrument | Role in foreign M&A | Pressure points for revision |
M&A Rules (2006; amended 2009) | Issued jointly by six agencies (MOFCOM, SASAC, SAT, SAIC, CSRC, SAFE). Covers equity and asset acquisitions, share swaps and payment terms. The 2009 amendment replaced the antitrust chapter with a single merger-filing article. | Built for the approval era and pre-dating the Foreign Investment Law. Payment schedule is rigid: full consideration within three months of the new license, with a one-year schedule (at least 60% within six months) only by approval. Legacy references: SAIC no longer exists, and merger control has moved to SAMR. |
Foreign Investment Law (2020) and Information Reporting Measures | M&A falls within the statutory definition of foreign investment. For acquisitions of non-foreign-invested domestic companies outside the Negative List, the step is an initial report through the enterprise registration system when the change is registered (Art. 9 of the Reporting Measures). | Commentators have long urged conforming the M&A Rules to the reporting system. Negative List sectors still require entry clearance, so the two layers must be reconciled. |
Governs foreign strategic investment in A-share listed companies by directed issuance, agreement transfer or tender offer. The 2024 revision admitted foreign natural persons, relaxed asset tests, added tender offers, allowed unlisted overseas shares as consideration in directed issuances and tender offers, removed the holding threshold for directed issuances, cut it to 5% for the other routes, and shortened the lock-up from three years to 12 months. | The Action Plan’s item on non-related-industry issuers points to further loosening, but does not name the instrument to be amended. | |
Security Review Measures (NDRC/MOFCOM Order No. 37, in force Jan. 18, 2021) | Covers foreign investment that affects or may affect national security, expressly including acquisitions of equity or assets. Run through an office at the NDRC with MOFCOM. | Operates independently of the M&A Rules; any revised text will have to interlock with it. |
Law merger control | Acquisitions meeting the State Council’s thresholds require prior filing; cross-border share swaps may also trigger filings. | The M&A Rules’ merger-filing article predates the 2018 transfer of merger control to SAMR. |
III. What the Revision Is Likely to Address
The Action Plan names only broad objectives. The points below are our reading of its wording, not of any draft text.
● Alignment with the reporting regime. The M&A Rules still presuppose an approval-based process. We expect the revision to recast filing steps around the information-reporting system and clarify which transactions (Negative List sectors, related-party acquisitions, listed targets) still need MOFCOM clearance. Related-party acquisitions through offshore vehicles, which the Negative List routes to foreign investment, outbound investment and foreign-exchange rules, will also have to sit alongside the new State Council Regulation on Outbound Investment (Decree No. 837, in force July 1, 2026).
● Consideration payment. The fixed payment schedule is the most concrete target. More flexibility for deferred or staged consideration would make cross-border deals easier to structure, though how far the revision goes is unknown.
● Cross-border share swaps. The M&A Rules allow shares of overseas listed companies or special-purpose vehicles as consideration, a route commentators describe as little used, while the 2024 Strategic Investment Measures already accept unlisted overseas shares in two channels. Harmonizing the two is a natural item.
● Listed-company strategic investment. Commentators read the non-related-industry item as lifting an industry-relatedness limit that kept PE investors in portfolio-style stakes. The Action Plan itself does not say which instrument will carry the change or how “qualified” institutions will be defined.
● Regulatory coordination. Six agencies co-issued the original rules. A revision is likely to rationalize the roles of MOFCOM, SAMR, CSRC, SAFE, SAT and the NDRC, supported by the information-sharing under Measure (15).
IV. Practical Dynamics and Recommendations
No consultation draft has been published, and no effective date or transition rule has been announced. Until then the existing instruments, including the M&A Rules, remain formally in force. For deal teams:
● Do not wait, but draft for change. Build flexibility into payment mechanics, long-stop dates and conditions precedent so the transaction works under either the current or a revised payment regime.
● Confirm current practice. Check with the competent commerce and market-regulation authorities how the payment schedule and reporting steps apply to the specific structure, since the M&A Rules’ text and the reporting regime do not align neatly.
● Keep shelved listed-company deals on a watch list. PE and strategic investors who set aside A-share issuances because the target was outside their sector should monitor how the Action Plan item is implemented and how “qualified” is defined.
● Gating items are unchanged. Security review, merger-control thresholds and Negative List entry conditions apply regardless. Given Measure (5), add early screening for data-export and important-data exposure in due diligence.
● Watch for the draft. Track MOFCOM’s policy-release page for a consultation text, and review transition provisions for pending transactions as soon as one appears.
V. Concluding Note
MOFCOM’s commitment signals that the 2006 architecture will be rebuilt around the reporting-based regime that has governed foreign investment since 2020, with emphasis on payment flexibility, cross-border share consideration and listed-company access. Until the text appears, the main risk for dealmakers is structural: transactions signed now will close under rules that are about to change.
