In recent years, investment promotion through mergers, acquisitions, and restructuring has emerged as a "favorite" approach to attracting investment across the country; this is an innovative method of investment promotion that uses enterprises as its vehicle.

M&A and restructuring originated as a product of the market economy; it refers to the process of merging two or more companies, establishing new entities, or acquiring equity stakes in one another to maximize corporate value.

Simply put, M&A-based investment promotion leverages local enterprises’ existing resources, with the government assisting companies in expanding their production scale through mergers and acquisitions to achieve the goal of attracting investment.

What advanced practices in M&A-based investment promotion from various regions are worth learning from and emulating?

A Rising Star

In 2018, some regions recognized the advantage of leveraging market principles to utilize capital market operations and external funding to expand corporate scale and enhance competitiveness, thereby driving regional economic development. This led to the emergence of the innovative “M&A-based” investment promotion approach.

In 2019, industrial parks in economically strong regions such as Shanghai and Beijing established investment and financing platforms wholly owned or controlled by their park management committees. These platforms supported local leading enterprises in conducting M&A activities, integrating financial capital, guiding funds, and industrial capital to leverage synergies and attract strong foreign advanced manufacturing companies.

In 2020, the first M&A Investment Promotion Conference was held in the Yangtze River Delta region. M&A-based investment promotion has become a key strategy for leading regions to attract foreign investors, encourage industrial parks to develop the Chinese market, and even establish global headquarters within these parks to reach global markets, successfully facilitating the “going global” of Chinese enterprises and the “bringing in” of foreign enterprises.

That same year, Shandong Province issued the "Several Measures for Further Improving the Utilization of Foreign Capital," the first document in the country to explicitly emphasize the encouragement of M&A-driven investment promotion. This signifies that M&A-driven investment promotion will be more widely applied in investment attraction efforts.

Regions Are Eager to Get Started

Regions such as the Suzhou Industrial Park, Shanghai Jiading, and Beijing Yizhuang have been pioneers in M&A-driven investment promotion, actively attracting advanced manufacturing industries from abroad.

Shanghai Jiading Attracts Geely

In fact, as early as 2010, the Geely-Volvo project’s establishment in Jiading District, Shanghai, served as a microcosm of M&A-driven investment promotion.

At the time, Geely Group did not have sufficient funds to acquire Volvo on its own, so it actively sought cooperation with local governments. To attract the Geely-Volvo project, the Jiading District Government established Ji’erwo—a joint venture between Shanghai Jiading State-owned Assets and Shanghai Jiading Industrial Zone Development (Group) Co., Ltd.—which contributed 1 billion yuan to support the acquisition.

By actively providing financial support and offering preferential policies for the project’s implementation, the Jiading District government ultimately stood out among more than a dozen competing local governments. After the Geely project began production, it quickly generated a spillover effect of technology, strengthening the concentration of the automotive industry in Jiading District and driving its rapid development.

South Korean Companies Flock to Suzhou

In July 2019, Jiangsu Yawell Precision Laser Technology Co., Ltd. in Suzhou entered into a partnership with South Korea’s LIS to launch comprehensive strategic cooperation in the precision laser sector. The two parties plan to jointly invest in establishing a Chinese-controlled joint venture in China.

To complete this acquisition and facilitate the establishment of the joint venture, Yawell Precision Laser needed to increase its registered capital from 50 million yuan to 500 million yuan. The Suzhou Industrial Park attached great importance to this collaboration and promptly provided financial support, pooling resources from the Suzhou Industrial Park Major Industrial Project Investment Fund, corporate capital, and social capital to secure the 500 million yuan required for the strategic partnership.

In addition, the Park has made detailed arrangements regarding the transaction structure, post-merger integration plans, and localization implementation strategies, providing crucial safeguards for this transaction.

Beijing’s Chip Industry Strategy

Established in 2009, Beijing Yizhuang State-owned Investment Co., Ltd. serves as the primary platform for investment promotion in the Yizhuang Development Zone. After years of exploration and development, the company has focused its investment priorities on the park’s leading industries, including integrated circuits, next-generation displays, and smart manufacturing, with integrated circuits accounting for the largest share of its master fund portfolio.

The Yizhuang Development Zone has not only invested in numerous enterprises within the park but also sought investment opportunities in major overseas projects.

"Going out" is aimed at "bringing in"; overseas M&A is the first step in the investment strategy. The next step is to actively promote the localization of overseas technologies within the park to fill gaps in domestic technological fields and foster a positive synergy with local existing industries. To date, the Yizhuang Development Zone has completed more than a dozen overseas M&A deals through direct investment and support for cooperative funds, successfully bringing these projects to fruition.

M&A Requires Caution

As demonstrated by the above cases, M&A-driven investment promotion plays a powerful role in fostering local industrial clustering and economic development. However, this process requires local governments to commit substantial funds—often amounting to hundreds of millions—so the following key points must be noted.

First, before making an M&A decision, it is essential to conduct a thorough and detailed analysis of the enterprise’s own strengths, development strategy, and industrial structure to determine whether the acquisition is necessary.

Next comes the selection of acquisition targets, which requires the right timing and the company’s own evaluation criteria. The government can also provide leads, such as lists of prospective targets from investment promotion databases, making the process more targeted while helping companies mitigate acquisition risks. During the capital raising process, multiple sources—including government funds, corporate capital, and social capital—can be mobilized to provide greater support to the company.

Most importantly, the consolidation of resources following the merger and reorganization determines the success or failure of the process, and the government’s role is crucial at this stage. In areas such as land, talent, finance, and technology, the government must provide sufficient support to help companies resolve issues promptly and accelerate their return to a stable path of production and development.

The Boom Is Gaining Momentum

Leveraging Strengths and Achieving Mutual Benefits

M&A and investment promotion represent a win-win initiative for both local governments and enterprises. By facilitating mergers and reorganizations between local enterprises and foreign investors, the government enables companies to leverage each other’s strengths and complement their respective advantages, thereby accelerating their growth. Consequently, enterprises not only inject momentum into local economic development but also play a vital role in fostering the aggregation of local industrial clusters—killing two birds with one stone. Why not embrace this opportunity?

Leveraging the Market to Stimulate Growth

Today, local governments everywhere are emphasizing the need to transition from being “paddlers” to “helmsmen,” fully unleashing market vitality. Investment promotion through mergers and reorganization is a typical and effective form of market-driven economic operation. While adhering to market-oriented principles, enterprises and governments allow the initiative of the entities involved in mergers and reorganization to play the greatest role under market laws.

Optimizing Existing Assets for High-Quality Development

Currently, major cities—particularly Beijing, Shanghai, and Guangzhou—are shifting from a “growth-driven expansion” model to one of “optimizing existing assets,” and M&A-based investment promotion is one such approach. By revitalizing local enterprises, this strategy also integrates and utilizes various local production factors, achieving resource sharing and gradually transitioning toward a high-quality development model.

Conclusion

At present, China has entered an era of two-way investment, where both outbound investment and attracting foreign investment play a pivotal role in national economic development. Of course, while recognizing the advantages of M&A-driven investment promotion, local regions must also implement risk management measures to minimize failure rates and maximize strengths, thereby entering a virtuous cycle of mutual benefit and shared success.