Here Merger & Acquisition refers to “merger with and acquisition of domestic enterprise by foreign investors”:

A foreign investor purchases the stock right of a shareholder of a non-foreign-invested enterprise in China (domestic company) or increase capital of a domestic company so as to convert and re-establish a domestic company as a foreign-invested enterprise (Equity M&A) ; or a foreign investor establishes a foreign-invested enterprise and purchases and operates the assets of a domestic enterprise by the agreement of that enterprise; or, a foreign investor purchases the assets of a domestic enterprise by agreement and uses this asset investment to establish a foreign-invested and operate the assets (Asset M&A.)

Requirements of Foreign Investment :
1. Foreign investors’ merger and acquisition of domestic enterprise shall comply with the requirements stipulated by laws, administrative regulations and rules of China, and policies concerning industry, and land and environment.
According to the Guiding Catalog of Foreign Invested Industry, for an industry that is not allowed to be operated by a sole foreign investor, its merger and acquisition shall not result in foreign investors holding the enterprise’s entire equity. For an industry where Chinese party should have the holdings or the relative holdings, then the Chinese party shall maintain its holdings or relative holdings in the enterprise after M&A in that industry. For an industry that is forbidden to be operated by a sole foreign investor, the foreign investor shall not merger with or acquire any enterprise in that industry.
The business scope of the original invested enterprise to be merged with or acquired shall comply the requirements of the policy concerning foreign-invested industry. Whichever does not meet the requirement shall be readjusted.
2. If the ration of financial contribution of a foreign investor in the registered capital of the the foreign-invested enterprise after M&A is more than 25%, this enterprise shall enjoy the treatment of a foreign-invested enterprise.
If less than 25%, it will not enjoy the treatment of a foreign-invested enterprise except for separate provisions stipulated by laws and administrative regulations.
If domestic enterprises or natural persons merge or acquire the domestic companies that have something to do with them in the name of the companies legally established or controlled by them in foreign countries, the established foreign-invested enterprises shall not enjoy the treatment of a foreign-invested enterprise. Except that the company in foreign countries offers to buy the capital increase of domestic companies, or increase capital to the newly established enterprise after merger, the sum of the increase capital should take more than 25% of the enterprise’s registered capital.    
For the foreign invested enterprise established according to the way as prescribed above, except for the actual controllers, it may enjoy the treatment of foreign-invested enterprises.

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