Back on February 26, we noted that the Chinese government was apparently blocking Sichuan Tengzhong Heavy Industrial Machinery from its bid to buy Hummer from GM. Automotive News China has a more extensive explanation of the Chinese government role in approving foreign acquisitions in the Chinese auto industry:
Gaining government approval is now, and will continue to be the foremost task of any Chinese company, state-owned or private, when it seeks to acquire foreign auto assets.
So why is government approval so vital?
Well, if the company is state-owned, the necessity of government approval goes without saying. ..
China didn't start privatizing its economy until the late 1970s. Due to their short history, private Chinese companies are relatively small. They don't have enough capital to make acquisitions overseas on their own.
To get the money they need they have to borrow from a bank. And the banks in China are nearly all state-owned or controlled.
