China's Military Enterprises go public, foreign investment cautiously welcomed

Mr. Zhang Qinwei, Director of COSTIND

November 15, China's COSTIND (commission of Science Technology and Industry for National Defense) issued "Provisional Measures for Military Enterprises Shareholding Reform’s Implementation". This behavior showed that China has permit domestic listed corporation to buy and reform Military enterprises.

The "Provisional Measures" have cleared that Chinese military firms can be reformed and opened to public under 4 types: state-owned, state absolutely holding, state relatively holding, and state sharing.

After COSTIND's authorization, present domestic state-controlling-holding listed companies can deal with state-run military enterprises by unitary or partial acquisition and re-organization.

To future domestic listed firms carrying on military products, the new "Provisional Measures" especially regulate special articles, including:

No changes of Controlling Shareholders can become effective without reporting to COSTIND and carrying procedures for approval;
The alternation of board chairman and general manager must be recorded on COSTIND;
The recruitment of oversea independent directors must be recorded on COSTIND;
The significant acquisition behavior initiated by buyer, who will hold over 5% percent sharing of listed company, must declare to COSTIND.

Besides, foreign capital also gets clear ways of entering Chinese military industrial area. The "Provisional Measures" regulate that state-owned and state absolutely holding are forbidden to be sold to foreign capital; state relatively holding military firms are limited to foreign investment and re-organized state sharing military companies are totally opened for foreign investors.

Recently, series of regulations have been issued by COSTIND for delivering more instructions on more reformative involvements from non-state-own firms and foreign investment.