China says you can now buy 51%, uh-oh...


Today, China's Ministry of Finance said it would relax certain foreign investment limits. 

So far, only scant details have been published, but it seems global banks will now be able to buy 51% interests in Chinese securities funds and joint ventures, along with insurance companies (currently, 49%).

Full details yet to be provided.

In joint venturing, 51% is normally an OK result. In M&A, 51% is the simple majority threshold and considered a base camp position for those considering an ascent to avoid a failed half-pregnancy. But from an accounting perspective, it is a controlling stake and must be consolidated.

That's why going to/remaining at 51% has many implications and challenges.

What I am most interested in though, is whether this is a move by the Chinese Government to lay off some of the risk of China's ballooning $48 trillion in shadow debt and other unhealthy 'assets' held by zombie-firms. 

My scepticism aside, this will be considered an improvement on the current 49% ownership restriction for those entities and good news for those investors wanting to get half-pregnant in China.

Wait for the detail.


Subscribe to our quarterly Newsletter and Blog.