Compared to 12 months ago, the overall regulatory environment exhibits the following characteristics:

• Merger control: China’s merger control regime is more focused and technically sophisticated: higher notification thresholds mean fewer filings overall, but the State Administration for Market Regulation (SAMR) conducts more in-depth substantive scrutiny, especially in technology, platform and concentrated industries, and is more willing to review transactions below thresholds where competitive concerns arise.
• Foreign Direct Investment (FDI) regime: The general foreign investment environment continues to liberalise, with further narrowing of the Negative List and policy signals emphasising “high-level opening-up”. This is primarily aimed at encouraging long-term, high-quality investment rather than fast or speculative deal activity.
• National security screening: National security review (NSR) has become more predictable in structure but more firmly embedded in deal planning; transactions involving critical technologies, data, infrastructure or supply chains are more likely to be reviewed, and national security considerations are now more clearly co-ordinated with antitrust and data-related assessments.
• Sectoral regulatory approvals: Sector regulators (finance, telecoms, healthcare, energy, etc) remain a decisive factor in M&A, with cautious and policy-driven approval processes. Expectations are clearer than a year ago, but timelines and outcomes still depend heavily on alignment with industrial and security priorities.
• M&A-related litigation: Litigation and administrative challenges around M&A have increased in sophistication, with courts issuing more guidance on antitrust and competition disputes; parties now factor litigation and compliance risk earlier into deal structuring, though successful challenges to regulatory decisions remain uncommon.

• Merger control: China has shifted towards fewer but more intensive reviews. Higher filing thresholds reduce volume, while the SAMR conducts more in-depth substantive review, including call-in of below-threshold deals, with particular attention to technology, platforms, energy and other concentrated or strategic sectors.
• Procedural developments: Review processes for straightforward cases have become faster and more predictable through simplified filings and internal timelines. Complex transactions face more detailed information requests and co-ordination with sector regulators.
• FDI and national security: General foreign investment access continues to liberalise, but NSR has become routine and decisive in M&A planning for transactions involving data, critical technologies, infrastructure or supply chains.
• Sectoral regulation: Industry-specific approvals remain key drivers of timing and risk, with heightened scrutiny in financial services, telecoms, healthcare, energy and data-related businesses. Outcomes are closely tied to industrial and security policy priorities.
• Enforcement and compliance: Penalties for non-compliance (eg, failure to notify or gun jumping) remain strong deterrents, prompting parties to address antitrust, FDI and sectoral regulatory risks earlier and more systematically in deal structuring.

M&A regulatory scrutiny in China has concentrated on the following key sectors:

• Technology, semiconductors and data: These sectors face the heaviest merger control and national security scrutiny, driven by concerns over market concentration, control of critical technologies and data security.
• Pharmaceuticals and healthcare: Transactions are closely reviewed for consolidation and innovation impacts, with frequent antitrust intervention.
• Energy, infrastructure and utilities: Deals attract heightened review due to natural monopoly issues, state involvement and security sensitivities.
• Financial services and platforms: Financial institutions and large digital platforms remain subject to layered regulatory approvals and ongoing antitrust enforcement.

The main statutes, regulations and policy instruments are as follows:

• Merger control: The core framework is the Anti-Monopoly Law (AML) and the supporting Regulation of Review of Concentration of Business Operators (“Merger Review Regulation”), along with other regulations and guidelines on merger notification, review procedures and remedies published by the SAMR.
• FDI and national security: Foreign investment is mainly governed by the National Security Law, the Foreign Investment Law (FIL), the Special Administrative Measures for Foreign Investment Access (“Negative List”) and the Measures for National Security Review of Foreign Investment (“NSR Measures”).
• Sector-specific approvals: M&A in regulated industries are subject to industry-specific laws and regulations.
• Data and technology: The Cybersecurity Law, Data Security Law and Personal Information Protection Law increasingly affect technology- and data-driven transactions.
• M&A litigation: Challenges and disputes are governed by the Administrative Litigation Law, the Civil Procedure Law and Supreme People’s Court judicial interpretations.

The main authorities and their powers are as follows:

• Merger control: The SAMR and its delegated five provincial authorities in Beijing, Shanghai, Shanxi, Chongqing and Guangdong review transactions for competition issues, can approve, condition or block deals, and consult sector regulators as needed.
• FDI and national security: The Ministry of Commerce (MOFCOM) handles foreign investment filings under the Negative List, while the Office of the NSR Working Mechanism (“NSR Office”) under the National Development and Reform Commission (NDRC) reviews deals in critical sectors (tech, infrastructure, data) for security risks.
• Sector-specific approvals: Industrial regulators control licences and operational consents, eg, the National Financial Regulatory Administration (NFRA) (banking/insurance), the China Securities Regulatory Commission (CSRC) (securities), the Ministry of Industry and Information Technology (MIIT) (telecoms/IT), the National Health Commission (NHC) (healthcare) and energy/environment regulators.

In China, both merger control and FDI/national security rules can apply to foreign-to-foreign deals if they affect the Chinese market or Chinese interests. The SAMR reviews foreign mergers when parties’ sales or assets in China meet thresholds or the transaction could restrict competition domestically. NSR applies if the deal involves Chinese entities, critical infrastructure, data or technology, even if the parties are foreign. Deals entirely outside China with no link to China are generally not covered.

In China, merger control, FDI/national security and sector-specific approvals are separate but co-ordinated. The SAMR reviews competition issues, the MOFCOM handles foreign investment filings, and the NSR Office reviews security-sensitive deals, while sector regulators oversee licences and operational consents. Authorities consult each other and share information. Most significant deals require a layered, integrated approach to satisfy all requirements before closing.

In China, the following types of transactions may constitute a concentration of undertakings subject to the merger control regime:

• a merger of undertakings;
• acquiring control over one or more undertakings through acquisition of equity or assets; and
• acquiring control or exercising decisive influence over one or more undertakings via contract or other means.

Joint ventures may be caught if two or more undertakings will jointly control the joint venture entity after the transaction. Minority acquisitions may be caught if the acquirer obtains control or exercises decisive influence over the target, but pure financial investment without obtaining any “control” rights will not be caught. Internal restructuring or reorganisations are generally not caught if they are controlled by the same undertaking pre- and post-transaction.

The current jurisdictional thresholds of merger control in China are based on turnover, as follows:

• the combined worldwide turnover of all undertakings concerned in the preceding financial year exceeds CNY12 billion, and the nationwide turnover within Mainland China of each of at least two undertakings concerned in the preceding financial year exceeds CNY800 million; or
• the combined nationwide turnover within China of all undertakings concerned in the preceding financial year exceeds CNY4 billion, and the nationwide turnover within Mainland China of each of at least two undertakings concerned in the preceding financial year exceeds CNY800 million.

The jurisdictional thresholds currently do not include the factors of asset value, transaction value or market share. However, a transaction not meeting either of the above jurisdictional thresholds but potentially raising substantial competition concerns may be called in by the SAMR.

Transactions meeting either of the jurisdictional thresholds noted in 3.2 Notification Thresholds must be notified before closing.

If a transaction may raise substantial competition concerns, filing is strongly recommended even if not technically required, as it may be called in by the SAMR, especially when it involves certain innovative markets that may not generate substantial turnover at an early stage.

If mandatory notification is triggered, a notification must be filed and cleared before closing.

Before the SAMR grants clearance, the undertaking must not implement the transaction; otherwise, it may constitute gun jumping. The Provisions on the Review of Concentrations of Undertakings effective from 15 April 2023 provide a non-exhaustive list of actions that may constitute gun jumping as follows:

• effecting changes to corporate entity registration or the register of shareholders;
• appointing senior management personnel;
• participating in business decision-making and management;
• exchanging sensitive information with other operators; and
• carrying out business integration.

There are exemptions and simplified procedures applicable to certain transactions.

According to the AML, the following types of transactions may be exempted from merger filing:

• where one of the undertakings involved in the concentration holds at least 50% of the voting shares or assets of each of the other undertakings; or
• where at least 50% of the voting shares or assets of each undertaking involved in the concentration are held by an undertaking not involved in the concentration.

The simplified procedure applies to the following types of transactions:

• where all undertakings involved have a collective market share of less than 15% in the same relevant market;
• where the undertakings involved have a vertical relationship, and each has or collectively they have a market share of less than 25% in the vertical market;
• where the undertakings involved do not have a vertical relationship, and each has less than a 25% share in all related markets;
• where the undertaking involved establishes a joint venture outside China, and the joint venture does not engage in economic activity in China;
• where the undertaking involved acquires equity or assets of a foreign enterprise that does not engage in economic activity in China; or
• where a joint venture jointly controlled by two or more undertakings becomes controlled by one or more of them through the transaction.

There are three phases of the statutory review timeline for transactions formally accepted by the SAMR, which are:

• Phase I: lasting a maximum of 30 calendar days from the date the SAMR formally accepts the filing;
• Phase II: lasting a maximum of 90 calendar days from the date the SAMR informs the parties in writing the beginning of Phase II; and
• Phase III: extending the timeline for another 60 calendar days under certain circumstances.

In practice, most transactions reviewed under the simplified procedure are cleared within the Phase I period, and the transactions under the normal review procedure are cleared in Phase II or III.

Before formal acceptance by the SAMR, there is no statutory review timeline. In practice, it may take one or two months (subject to the completeness of the information submitted in the initial filing report).

The SAMR issued the Notification Form for the Merger Review of Concentration of Undertakings (“Notification Form”), which sets out the information to be submitted, mainly including the following:

• general information relating to each party to the notified concentration (including business scope, information regarding subsidiaries or affiliates, etc);
• summary of the proposed concentration (including deal amount and steps taken thus far);
• commercial rationale or motivations for undertaking the notified concentration;
• market definition (reasons explaining the definition of the relevant product and geographic market);
• industry overview and market data (in relation to the relevant market);
• assessment of the effect of the concentration on the relevant market;
• the top five suppliers and customers in relation to each party to the concentration (required in cases under the normal review procedure); market entry analysis in relation to the relevant market (required in cases under the normal review procedure); and
• other information in relation to competitors in the relevant market.

On 12 October 2024, the SAMR updated the Notification Form and the public notice form for the simplified procedure, which further simplified the information to be submitted in notifications eligible for simplified review.

It is possible (but not obligatory) to contact the competition authorities (including the SAMR and its delegated provincial authority) before submission. According to past experience, the notifiability of the transaction and the applicable review procedure are usually discussed in pre-filing discussion with the authorities.

Article 33 of the AML sets out the factors to be considered in assessing the competitive effects of a concentration, including:

• the market share of the undertakings that participate in the concentration and their control over the market;
• the degree of market concentration of the relevant market;
• the impact of the concentration of undertakings on market access and technological advancement;
• the impact of the concentration of undertakings on consumers and other relevant undertakings;
• the impact of the concentration of undertakings on the development of the national economy; and
• other factors affecting market competition that the AML Enforcement Agency of the State Council deem necessary to be taken into account.

In practice, the SAMR usually defines relevant markets based on business relationships between undertakings, and assesses the market power and degree of market concentration based on the market share of the undertakings and the top market players in the relevant market. The SAMR may also assess the impacts of the transaction on market entry, upstream and downstream market players, technological development and consumers’ benefits, as well as the public interest and industrial policies.

Unilateral effects and co-ordinated effects are usually examined in a horizontal concentration. In a vertical concentration, the SAMR usually assesses the vertical foreclosure effects and the co-ordinated effects. In a conglomerate merger, the SAMR assesses whether the concentration may give rise to limiting or foreclosing effects via tying or bundling strategy, and may give rise to any co-ordinated effects. For transactions involving innovation and the digital sector, compatibility and free access to platforms or key resources are also usually considered.

Efficiencies and failing firm arguments are considered by SAMR. However, with no public precedent, the SAMR has not specifically discussed how efficiencies or failing firm arguments may affect its decision.

The following types of remedies are available and commonly implemented in China:

• Structural remedies: such as divestiture of tangible assets or intangible assets, including intellectual property rights, data, or relevant rights and interests;
• Behavioural conditions: such as providing access to infrastructure, including networks or platforms, licensing key technologies (including patents, know-how or other intellectual property, and FRAND commitments), terminating exclusive agreements, modifying platform rules or algorithms, offering compatibility or not reducing interoperability level, and “hold separate” orders that require the transaction parties to operate independently for a period of time; or
• Hybrid remedies: comprehensive conditions combining both structural remedies and behavioural conditions.

Parties may propose remedies either before or after the SAMR informs them that the transaction may raise substantial competition concerns. The SAMR evaluates whether the remedies proposed by the parties adequately address those competition concerns. The SAMR may propose remedies to the parties but cannot force them to accept. Only when the parties and the SAMR agree on proposed remedies can they be imposed in the transaction’s conditional clearance.

Third parties (including competitors, customers, suppliers, employees and other third parties) are entitled to be involved in merger control proceedings. For cases under the simplified review procedure, any third party is allowed to provide comments during the public announcement period of ten calendar days from the formal acceptance of the filing. For cases under the normal procedure, third parties are also permitted to provide comments to the SAMR, and the SAMR may solicit comments from key stakeholders on market definition and accuracy of market data, and opinions on the impacts of the transaction on the relevant market.

The authority is obliged to maintain the confidentiality of commercial secrets, personal information and national security secrets obtained in merger review. The Notification Forms submitted by the parties are not publicly available to third parties or the public. For cases reviewed under the simplified review procedure, the SAMR publicly releases a Public Announcement Form submitted by the parties, which sets out a key summary of the transaction, a brief introduction to the parties, reasons that the transaction is eligible for simplified procedure, a description of the relevant markets, and a range of market shares of the undertakings concerned.

The SAMR only publishes the full decision for conditionally approved and prohibited cases, which sets out a range of market shares of the undertakings concerned without disclosing confidential information. For all cases (including unconditional approval cases), the SAMR publishes the name of the transaction, the undertakings concerned and the approval date. In 2025, the SAMR started to publish some cases for reference, in which the SAMR redacted the identities of the undertakings concerned and other confidential information.

Pursuant to Article 65 of the AML, parties may appeal against prohibition decisions and conditional approval decisions, which may be submitted for administrative review and then for judicial review by filing an administrative lawsuit if the parties are not satisfied with the result of the administrative review.

In December 2024, the Beijing Intellectual Property Court made a ruling to uphold the validity of the conditional approval made by the SAMR for the acquisition of Tobishi by Simcere, which was also the first below-threshold conditionally approved transaction in China. The SAMR conditionally approved the transaction in September 2023, and Tobishi appealed for administrative review and then judicial review. Tobishi did not further file an appeal against the ruling by the Beijing Intellectual Property Court.

In China, FDI that has an impact or potential impact on national security is subject to NSR, as stipulated in both the National Security Law and the FIL. The review regime was established in 2011 and further updated by the NSR Measures jointly published by the NDRC and MOFCOM on 19 December 2020 and effective from 18 January 2021.

According to the FIL and the NSR Measures, foreign investments falling into the following categories shall be subject to NSR:

• investments in military industry, fields supporting military industry and other fields relating to the security of state defence, and investments in areas surrounding military facilities and military industrial facilities (“Military Related Investments”); and
• where a foreign investor acquires actual control over critical agricultural products, critical energy and resources, critical equipment manufacturing, critical infrastructure, critical transport services, critical cultural products and services, critical information technology and internet products and services, critical financial services, key technologies and other critical industries relating to national security.

The foreign investments subject to FDI/national security filing consist of both direct and indirect investments within the territory of China, including the following circumstances:

• where foreign investors invest, solely or jointly with other investors, in new projects or establish enterprises in China;
• where foreign investors acquire equity or assets of domestic enterprises by way of merger or acquisition; or
• where foreign investors make investments in China in any other form.

For any foreign investment falling under the category of Military Related Investments noted in 5.2 Scope of Transactions and Investors, it shall be subject to FDI/national security review, irrespective of the level of equity, voting rights or other control rights acquired.

For the second type of foreign investment noted in 5.2 Scope of Transactions and Investors, a control test may be applied, which includes the following circumstances:

• where the foreign investor holds more than 50% of the equity of an enterprise;
• where the foreign investor holds less than 50% of the equity of an enterprise, but the voting rights held by it can have a significant impact on the resolutions of the board of directors, the board of shareholders or the general meeting of shareholders; and
• other circumstances where the foreign investor may have significant impact on the enterprise’s business decision-making, human resources, finance, technology, etc.

In practice, the regulator has relatively broad discretion in determining the level of “actual control” and identifying industries that may fall into the scope of “other critical industries relating to national security”.

Foreign investments falling within the scopes noted in 5.2 Scope of Transactions and Investors must be filed before closing. However, as noted in 5.3 Triggers and Thresholds, the regulator has relatively broad discretion in determining the level of “actual control” and identifying industries that may fall within the scope of “other critical industries relating to national security”.

The review of the NSR filing involves the following phases:

• Pre-acceptance review: The NSR Office shall determine whether NSR is required within 15 working days from its satisfaction regarding receipt of complete notification materials.
• General review phase: If the NSR Office determines that NSR is required, it shall conduct a general review and determine in 30 working days whether to approve the FDI or extend to the special review phase.
• Special review phase: If the NSR Office considers that the notified transaction may have national security concerns during the general review phase, it will launch a special review for 60 working days. The special review period may be extended if special circumstances apply. However, the NSR Measures do not specify the circumstances to trigger such an extension or the time limit for the extended review period.

Theoretically, the NSR process takes place in parallel with merger control review. In practice, if there is a national security concern in the NSR, the SAMR is unlikely to grant merger control clearance until such national security concern has been addressed.

The NSR Measures do not list the factors or criteria for assessing national security or public order risks. However, the Notice of the General Office of State Council on Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors published in 2011 explains that the NSR shall assess the impact on national defence and security, including the production capacity of domestic products, capacity for provision of domestic services and relevant equipment and facilities required for national defence, the stable operation of the national economy, the basic order of society, and the research and development abilities of core technologies involving national security, which still serves as guidance on the substantive criteria of the NSR.

Article 9 of the NSR Measures allows parties to make a written commitment of conditions where the impact on national security can be addressed, and the NSR Office may grant conditional approval with such additional conditions. However, unlike the merger control regime, there is neither public guidance nor public precedent on what types of conditions may be imposed, which is usually subject to the discretion of the authority.

For failure to notify transactions, the NSR Office may request the transaction parties to notify within a time limit, and further request the parties to dispose of equity or assets and to take other necessary measures within a time limit to unwind the transaction and eliminate the impact on national security if the parties refuse to notify upon the request. The authorities can review transactions that have been closed on their own initiative.

For any foreign investment where the transaction parties fail to comply with conditions, the NSR Office may request them to make corrections within a time limit, and further to unwind the transaction if the parties refuse to make such corrections.

The NSR regime does not introduce fines as sanctions, but parties that fail to notify or comply with conditions shall be included in the relevant credit information system of the State as parties with poor credit records and shall be subject to the joint punishment mechanism.

During the review process, parties may discuss with the authorities and amend investment structures and mechanisms to address the national security concern (if needed). However, according to the FIL, the NSR decision is final and cannot be appealed through administrative review or judicial review.

Change-of-Control Approval Requirement in the Financial Sector

The financial sector (including banks, securities firms, insurance companies and other types of financial institutions) is a key sector where regulatory approval is required for change of control or ownership resulting from M&A transactions.

The main financial regulators overseeing such approvals include (i) the NFRA, (ii) the People’s Bank of China (PBOC) and (iii) the CSRC.

Financial regulatory approvals are required not only for change of control, but also when certain shareholding thresholds below 50% are reached in a merger, acquisition or other investment transaction.

Other Sectoral Approval Requirements

For other regulated industries, laws and regulations may broadly require entities to obtain approval from relevant industry regulators when conducting mergers or divisions, without specifically addressing change-of-control thresholds or particular shareholding percentages.

Relevant national sector regulators may include the National Energy Administration (NEA), the National Press and Publication Administration (NPPA), the Ministry of Education, the State Tobacco Monopoly Administration, etc.

These regulated industries include (but are not limited to):

• Mining
• Media and culture
• Education
• Tobacco
• Printing

Licence Approval Requirements

Enterprises licensed to operate in certain restricted sectors may need approval from the original licensing authority for modifying licence details or for re-licensing due to mergers or divisions. These requirements address changes to licences because mergers or divisions of the licensed entities may alter permit contents or affect the licensed enterprise’s qualification.

National licensing bodies may include the MIIT, the NHC, the NEA, the Civil Aviation Administration of China, the National Railway Administration, the Ministry of Housing and Urban-Rural Development, and the Ministry of Emergency Management.

These licence-regulated sectors include (but are not limited to):

• Telecommunications and the internet
• Medicine and healthcare
• Energy
• Transportation
• Building and construction
• Scientific research and technological services

Additional Approval Requirements

• Transfer of state-owned assets: M&A transactions involving state-owned assets require approval from the State-Owned Assets Supervision and Administration Commission (SASAC) or its local counterpart for equity transfers in state-invested enterprises.
• Listed company transactions: For listed companies, review by the relevant stock exchange and CSRC registration are required when undertaking a transaction where their shares (or securities that can convert into shares) are issued as consideration. Theoretically, a transaction using cash consideration is not directly reviewable by the stock exchange or CSRC. However, in practice, the stock exchange still exercises its supervisory authority over a listed company through reviewing the listed company’s information disclosures. When shareholders transfer directly held shares of a listed company through a share transfer agreement, the relevant stock exchange’s compliance review and consent are required.

Overall Framework

The sector-specific approval process for M&A transactions in China follows a similar framework, which typically entails four main stages: (i) application; (ii) review; (iii) decision; and (iv) announcement. Depending on the size, scope and location of the business involved, the national authority or its local counterparts (provincial or sub-provincial) may be responsible for approving the transaction. The approval timeframe typically ranges from several weeks to six months.

Financial Sector

Regulatory authorities

The financial sector is mainly overseen by: (i) the NFRA (supervising, eg, banks, insurance companies, non-bank financial institutions); (ii) the CSRC (regulating securities companies, futures companies, fund management companies, etc); and (iii) the PBOC (overseeing, eg, payment institutions, financial holding companies). Depending on the type of financial institution involved, approval from one or more of these regulators may be needed.

Approval process and timeline

When a triggering event (eg, a change of control or shareholding change) occurs, investors need to notify the target financial institution usually within a specific time limit (eg, 15 working days). The target financial institution must then report to the relevant financial regulators, usually within a specified timeline (eg, ten working days), and submit complete application materials to them.

Application materials typically include, among other things:

• background information and qualifications of the investors;
• transaction documents relating to the equity change; and
• internal organisational decision-making documents.

The approval process usually involves (i) a pre-acceptance period to decide whether to formally accept the application and (ii) a formal review period after the authority has accepted the application (usually no more than three months from the date of acceptance, with possible extensions).

The review may include written submissions, on-site inspections, interviews, hearings and/or follow-up information requests. In certain cases, the regulator may stop the clock during a review period. Upon completing the review, the regulatory authority issues a decision approving or disapproving the application.

Other Regulated Sectors

Regulatory authorities

Non-financial sectoral approvals are governed by national sectoral regulators (and their local counterparts). Local sectoral regulators are local governmental departments that exercise approval authority within their respective administrative regions.

Approval process

The approval framework for other regulated sectors is similar to that for financial institutions. However, specific procedural requirements and approval timelines vary by regulator.

Regulated entities undergoing mergers generally submit complete application materials to the original approving or licensing authority.

Application materials vary by industry but usually include qualification documents, licensing materials, transaction documents and internal decision-making materials.

Approval timelines

Approval duration ranges from several weeks to several months (normally no longer than 60 days) after receiving complete application materials, depending on, eg, industry characteristics, deal complexity and business scope.

Financial Sector

Financial regulatory authorities (eg, the NFRA, the CSRC, the PBOC) reviewing change of control or change of major shareholders typically examine the following factors:

• Investor qualification standards
• Funding source compliance standards
• Shareholding cap and quantity restrictions
• Foreign investment restrictions
• Fitness and propriety standards

Financial regulators usually apply more stringent criteria to controlling shareholders than to major shareholders (investors holding more than 5% of shares).

Other Regulated Sectors

For other regulated sectors, regulators (eg, the MIIT, the NHC, the NEA) may consider the following substantive standards in their approval processes:

• Alignment with industry development planning goals and policies
• Qualification requirements
• Adequate safety production safeguards
• Environmental protection compliance
• Market access and competition considerations
• Foreign investment restrictions
• Fitness and propriety standards

Regulators retain discretion to balance industry regulation and market development. They may impose special conditions or requirements (eg, on business conduct or operator rights and obligations) through licence attachments or approval decisions.

M&A transactions involving foreign investment in China may trigger multiple regulatory requirements, such as NSR by the NDRC and the MOFCOM, merger control by the SAMR and industry-specific approvals by industry regulators (eg, the NFRA, the MIIT, the NPPA). These processes generally are operated separately by different regulatory authorities and differ in, eg, triggering conditions, statutory filing deadlines, requested materials and review timeframes.

These variations create practical challenges for transaction parties, eg, regulatory due diligence and planning on types of regulatory approvals needed, timeline planning and foreign investor restrictions (if an international buyer).

However, there is a certain degree of co-ordination between different regulatory authorities through information sharing and inter-departmental collaboration.

Interaction Between Sector-Specific Approvals and Merger Control

Sector-specific approvals focus more often on the investor itself, for instance, evaluating the investor’s qualifications, compliance of funding sources, and business operation capabilities. Merger control assesses the impact of the transaction on competition in the Chinese market.

Despite the differences in focus, sector-specific approvals and merger control reviews complement each other:

• The SAMR during its merger control review may consult relevant sectoral regulators regarding, eg, industry competition conditions and market access policies.
• Sectoral regulators in their approval process may consider, eg, whether a merger or change of control affects fair market competition or whether the investor has previously engaged in unfair competition practices.

Interaction Between Sector-Specific Approvals and the NSR

The NSR is more politically sensitive, focusing on assessing the impact of the transaction on China’s national security. Where foreign investment involves acquiring actual control of a Chinese enterprise in a heavily regulated sector, such as those listed in the Negative List, transaction parties need to consider whether the NSR approval is needed to complete the transaction.

Nevertheless, co-ordination does exist between the NSR and sector-specific approvals:

• The NSR Office may consult industry regulators (eg, the CSRC, the PBOC, the MIIT) for specific transactions.
• Sector-specific approvals may examine foreign investor qualifications, investment proposals and foreign shareholding caps, which are also factors relevant to the NSR.

See 6.4 Interaction With Merger Control and FDI/National Security Reviews.

In PRC M&A deals, conditions precedent typically include the following regulatory approvals and litigation-related outcomes:

• Regulatory approvals:
1. Merger control: Anti-monopoly approval from the SAMR is mandatory if the prescribed filing thresholds are met.
2. FDI approvals: Clearance from the MOFCOM or from the relevant industry regulators for investments in restricted sectors (eg, finance, telecommunications).
3. The NSR: Mandatory for foreign investments in sectors deemed sensitive to national security (eg, defence, critical infrastructure, key technologies).
4. State-owned asset approvals: Consent from the SASAC is required for transactions involving state-owned enterprises (SOEs).
5. Outbound/inbound investment: For Chinese acquirers, overseas direct investment filings with the NDRC, the MOFCOM and the State Administration of Foreign Exchange are necessary.
6. Other: For certain restricted sectors, eg, financial industry, approvals from sector-specific regulators may be needed (see 6.1 Regulated Sectors Requiring Approval).
• Litigation-related outcomes:
1. Resolution of specific material litigation: Final and favourable court judgments or arbitral awards for any high-risk pending litigation identified during due diligence.
2. No material adverse effect: Absence of pending/threatened litigation reasonably expected to cause a material adverse effect.
3. No new material claims: No new litigation threats posing significant liability.

Long-stop dates and outside dates are negotiated based on the complexity of the conditions precedent and expected regulatory timelines. A period of three to six months from signing is standard, which may be extended for complex cases. Where prolonged regulatory review is anticipated (eg, for antitrust clearance), a separate, later outside date may be set. Key negotiations typically cover unilateral extensions, the permitted number of extensions, and cost allocation. If a regulatory filing remains pending by the agreed date, parties may agree on “best efforts” obligations or extension rights for pending approvals.

The final design of these terms will depend on the transaction structure, governing law and the parties’ respective bargaining power.

In PRC M&A, “reasonable best efforts” or “best efforts” are standard for obtaining approvals and defending challenges under the regulatory approvals. These require parties to take all reasonable steps, such as submitting filings promptly and co-operating with the regulatory authorities’ inquiries.

“Commercially reasonable efforts” is similar to “reasonable best efforts” but may place greater emphasis on the reasonableness of actions from the obligated party’s own commercial standpoint. In practice and judicial interpretation, its standard of rigour is sometimes viewed as slightly lower than that of “reasonable best efforts”, though the distinction can be subtle. In many transactions, the two terms are often used interchangeably or considered to impose substantially similar obligations.

“Hell or high water” represents the strictest and most absolute standard of obligation. The obligated party is required to fulfil its duties at all costs regardless of obstacles or difficulties. However, in PRC M&A practice, such an extreme standard is not commonly adopted. Transactions tend to favour “best efforts” commitments to avoid unlimited liabilities.

Allocation of regulatory and litigation risks in PRC M&A aims to balance transaction certainty, price protection and risk‑bearing costs. The final structure reflects each party’s bargaining power, risk appetite and deal urgency.

• PRC deals frequently involve a substantial deposit paid at signing. If the deal fails due to the buyer’s breach or financing failure, the seller typically retains the deposit.
• “Reverse break fees” are also widely used, especially in cross-border deals involving major regulatory approvals (eg, antitrust or foreign investment review). The fees are often secured in escrow due to foreign exchange controls and are triggered if the buyer fails to obtain key approvals or fails to consummate the closing.
• Price adjustments further allocate specific risks by linking future financial impacts (eg, lawsuit outcomes) to the final consideration. Operationally, price adjustments are implemented post-closing through deductions from an escrow account or direct seller indemnification, based on final adjudicated liabilities or settlement costs. Buyers typically require such provisions to shield themselves from unforeseen liabilities, while sellers negotiate to limit exposure by introducing thresholds or caps, or arguing that risks were already priced in.

In PRC M&A transactions, interim operating covenants are structured to facilitate lawful integration planning while strictly avoiding gun jumping and related regulatory risks. Aligned with applicable PRC law and transaction agreements, these covenants generally require the target to operate in the ordinary course of business during the interim period. Material actions, such as asset disposals, entering into significant contracts or key personnel changes, typically require the buyer’s prior consent, thereby preserving deal value without transferring operational control.

To prevent gun jumping, operational covenants are typically designed as protective veto rights rather than affirmative control mechanisms. Buyers should avoid exercising de facto control over daily operations, pricing or production before closing. Legitimate integration planning is permitted through structured channels such as clean teams and third-party advisers, which allow necessary information exchange (eg, data sharing for due diligence) while preventing direct sharing of competitively sensitive information between business units.

In practice, parties balance planning and compliance by relying on phased integration approaches and clean team protocols, ensuring the target operates independently until clearance is obtained. The SAMR has strengthened enforcement of the AML, making careful design of interim covenants and strict adherence to conduct rules essential to avoid violations while advancing post-closing integration.

Co-ordinating PRC merger control with multi-jurisdictional reviews raises issues such as overlapping timelines, conflicting remedies and data sharing restrictions:

• Conflicting timelines: Varying review periods across jurisdictions prolong uncertainty, as the overall timeline depends on the slowest authority.
• Divergent substantive standards: Regulatory bodies apply distinct criteria in their reviews. Remedies required in one jurisdiction (eg, a divestiture) may conflict with another’s industrial or national security policy, leading to inconsistent outcomes from unconditional approval in one region to blockages or onerous conditions in another.
• Conflicting submission: Arguments or disclosures made to one regulator can undermine the parties’ position before another authority. Furthermore, remedies imposed by different authorities may also be mutually incompatible.

Transaction documents manage these risks through several key provisions:

• Conditions precedent:
1. Listing key approvals: Specify “must-have” approvals (eg, merger clearances in the multiple jurisdictions involved) as conditions precedent.
2. Material adverse effect qualifiers: Approvals may be conditioned on not receiving “burdensome conditions” that would constitute a material adverse effect.
• Efforts/co-operation obligations: Define the required effort level (eg, “reasonable best efforts”) to obtain approvals and include covenants for co-operation and information sharing.
• Risk allocation for divergent outcomes:
1. Divestiture/remedy obligations: Specify which party must bear the cost and responsibility for implementing remedies.
2. “Drag” and “pull” rights: Allow one party to terminate the entire transaction if a key jurisdiction blocks the deal or permit the buyer to waive approval in a problematic jurisdiction (if legally feasible) and proceed with closing elsewhere.
3. Reverse break fees: Provide compensation and a clean exit if a key approval fails.
• Long-stop date/split closing:
1. Long-stop date: Provide a final deadline for satisfying all conditions precedent to closing. Failure to obtain all required approvals by this date will trigger termination rights for one or both parties.
2. Split closings: In some cases, parties may negotiate a “split closing”. However, this is legally complex and risky regarding gun-jumping compliance, so it is generally avoided unless necessary.

In China, disputes may arise during the entire process of M&A transactions, and among them, M&A deals involving listed companies and SOEs are subject to higher regulatory requirements and also involve more stakeholders, resulting in more disputes compared to deals among private entities. Notably, a significant portion of these disputes are resolved through arbitration rather than court litigation, due to confidentiality and the expertise of arbitrators.

The main types of disputes include:

• Pre-closing and deal failure: Disputes over the validity of framework agreements (MOUs), breach of exclusivity, or the failure to satisfy “conditions precedent” (eg, regulatory approvals or internal SOE authorisations).
• Post-closing price adjustments and VAM: This is where most disputes arise nowadays. It involves “valuation adjustment mechanisms” (VAM) where targets fail to meet performance targets, leading to disputes over cash compensation or share redemption.
• Representations and warranties: Claims arising from a breach of warranties, typically involving undisclosed liabilities, financial misrepresentation (fraud), or issues relating to environmental and tax compliance discovered post-closing.
• Corporate governance and minority rights: Disputes triggered by “procedural irregularities” in company resolutions, infringement of minority shareholders’ right of first refusal (ROFR), or the exercise of shareholders’ right to information.
• Control and exit disputes: Conflicts over the handover of corporate seals (chops), licences and management rights, as well as deadlocks leading to petitions for company dissolution.

In China, challenges based on these grounds are frequent and high-stakes, especially following the 2024 PRC Company Law’s heightened emphasis on fiduciary duties.

Procedural defects are a primary trigger; shareholders often petition to revoke or nullify resolutions due to irregularities in voting, notice or quorum. In SOE transactions, the absence of mandatory asset appraisals or administrative approvals can render a deal void as a matter of law.

Conflicts of interest are increasingly litigated through shareholder derivative suits. Transactions involving “self-dealing” without proper disclosure or the mandatory recusal of interested directors are highly vulnerable to claims regarding breach of the duty of loyalty.

Disclosure failures are most prevalent in public M&A. Material omissions or misrepresentations regarding connected transactions, significant liabilities or pending litigation frequently result in both regulatory sanctions and civil compensation claims. Additionally, minority shareholders actively challenge deals through “appraisal rights” if they perceive unfair pricing during mergers.

While Chinese courts are generally cautious about interfering with substantive business judgement, they maintain strict scrutiny over procedural compliance and transparency, making these grounds the most common basis for M&A litigation.

Under Chinese law, there is no statutory concept of material adverse change or effect. Courts and tribunals usually enforce such clauses under the principle of party autonomy. In the absence of a specific contractual clause, parties often invoke the “change of circumstances” doctrine as stipulated in the Civil Code. The following three aspects are examined: (1) whether there is a fact constituting a change of circumstances; (2) whether such fact was unforeseeable at the time of signing and not a commercial risk; and (3) whether the continued performance of the contract would be manifestly unfair.

Regarding closing conditions, courts adopt a strict contractual interpretation but also apply the “good faith” principle. If a party intentionally prevents a condition from being satisfied to escape the deal, the court may deem that condition fulfilled. For regulatory conditions, courts examine whether the party exercised “best efforts” to obtain approval; failure due to genuine government rejection typically allows for termination without liability.

Termination rights are generally upheld if they align with specific contractual triggers or constitute a “fundamental breach”. However, courts may also consider “transaction stability”, meaning they may be hesitant to grant rescission for minor or technical breaches, preferring to award damages instead.

Disputes over regulatory obligations are primarily resolved by assessing the standard of effort (eg, “best efforts” or “reasonable commercial efforts”) defined in the contract. Courts and tribunals examine whether the obligated party acted in good faith and exhausted all reasonable administrative steps to secure approvals.

In China, M&A disputes are primarily resolved through arbitration or courts.

• Arbitration: Preferred for private equity and cross-border deals due to its confidentiality and the expertise of commissions such as CIETAC, SHIAC or BIAC. It is the default for contractual breaches if an arbitration clause exists.
• Courts: Retain mandatory jurisdiction over statutory corporate disputes (eg, validity of resolutions, shareholder derivative suits), typically at the company’s or defendant’s domicile.

Interim Remedies

Parties frequently utilise asset preservation (freezing bank accounts or equity). This is crucial for preventing the disposal of target assets.

Final Remedies

• Damages: The most common remedy, and damages are usually limited to actual damages (damages incurred and loss of expected interests).
• Specific performance: Courts may order the completion of a closing or share transfer, though they remain cautious if performance is practically impossible.
• Termination: Available for fundamental breaches, allowing the non-breaching party to exit the deal and seek restitution.
• Declaratory relief: Used to confirm the validity or invalidity of corporate actions and board resolutions.

As noted in 5.9 Transparency, Confidentiality and Judicial Review, the NSR decision is final and cannot be appealed in court. It is not common for a merger control or sectoral decision to be challenged in court. The first and only judicial challenge against a merger control decision publicly disclosed is the one noted in 4.9 Appeals and Judicial Review of Merger Decisions.

For merger control cases, the transaction parties impacted by regulatory decisions have the standing to challenge the regulator’s conditional approval decision or prohibition decision (in particular, the notifying parties impacted in conditional approval cases, and the transaction parties in prohibition cases). However, the parties have no standing to challenge unconditional approval decisions. The AML does not grant other entities standing to challenge merger review decisions, nor does public precedent support the standing of any third parties so far.

There is only one case that challenges a merger review decision (see 4.9 Appeals and Judicial Review of Merger Decisions), in which the court upheld the economic and technical assessment made by the regulator.

The judicial review process does not affect the validity of the regulator’s decision, which is usually implemented without suspension.

As noted in 9.1 Judicial Challenges to Regulatory Actions, there is only one case challenging a regulatory decision, in which the court upheld the decision made by the SAMR. Therefore, there is no public precedent for follow-on damages actions or other civil claims relating to regulatory decisions so far.

In China, follow-on and standalone damages actions concerning M&A-related antitrust conduct – such as gun jumping or sensitive information exchange – remain relatively rare. Enforcement is primarily driven by the SAMR through administrative investigations and penalties. While the AML permits civil litigation, several factors limit its prevalence:

• Evidentiary hurdles: Plaintiffs bear a heavy burden to prove the illegality of the conduct, quantifiable economic loss and a direct causal link. Accessing sensitive data from private M&A processes is particularly difficult.
• Reliance on regulation: Follow-on actions are scarce because they depend on a final, non-appealable administrative ruling. Standalone actions are even rarer due to significant information asymmetry.
• Plaintiff composition: Most claims are initiated by sophisticated corporate competitors; individual consumer-led suits are virtually non-existent in this niche.

Ultimately, while the potential for civil damages exists, the primary legal risk for parties remains regulatory intervention, which can lead to significant fines or the forced unwinding of a transaction.

China does not have “class actions” in the US sense but utilises a representative litigation system, which is categorised into two types:

• Ordinary representative litigation (opt-in): Investors with similar claims must proactively register with the court to participate. This is the standard mechanism for general M&A-related contractual or tort disputes.
• Special representative litigation (opt-out): Exclusively applicable to securities disputes involving public companies. Initiated by state-backed investor protection institutions, it follows an “opt-out” model where investors are automatically included unless they explicitly withdraw. This is a powerful tool for addressing financial fraud or disclosure failures in public M&A.

Statute of Limitations

The standard limitation period is three years, commencing when the claimant knows or should have known of the infringement and the identity of the liable party. In M&A, the “starting point” is often contested due to the latent nature of damages, such as delayed performance failures or long-term market distortions.

Causation

Plaintiffs must establish a direct causal link between the misconduct (eg, misrepresentation or illegal concentration) and the loss. This is difficult in M&A due to the “multiple causes” problem. Courts often struggle to isolate the impact of the defendant’s conduct from external variables such as market volatility, industry downturns or the intervention of third-party intermediaries.

Quantification of Damages

While actual losses are straightforward, claiming for loss of expected interests (eg, lost profits or business opportunities) faces strict judicial scrutiny. Courts adopt a “prudent determination” approach, requiring high-probity evidence such as forensic audit reports and historical industry data. To prevent overcompensation, speculative future gains are typically excluded unless they can be proven with reasonable certainty.

Settlements and alternative dispute resolution are highly prevalent in China, driven by a judicial policy of “prioritising mediation”. Courts and arbitral institutions proactively organise mediation throughout proceedings. This is especially common in M&A disputes involving trade secrets or sensitive information exchange, where parties prioritise confidentiality and reputational protection.

Flexibility and Continuity

Parties can negotiate creative solutions (eg, instalment payments or equity restructuring) that sustain long-term business co-operation.

Enforceability

Under the PRC Civil Procedure Law, a court-issued Civil Mediation Statement has the same legal effect as a judgment. For out-of-court settlements, parties can seek “judicial confirmation” to ensure compulsory enforcement.

Limitations

Private settlement agreements without judicial or arbitral confirmation are merely contractual. If breached, the non-defaulting party must initiate new proceedings to enforce the settlement terms, potentially extending the dispute timeline.

One area which will be interesting to watch this year is how Chinese authorities will treat mergers and acquisitions in the technology, semiconductor and data space, especially those involving AI-related businesses and where the acquirer is a foreign company given concerns over market concentration, control of critical technologies and data security.

One additional emerging regulatory concern may be the evolving impact of export control restrictions (technology, critical natural resources, etc) on China-related M&A. Chinese authorities are increasingly concerned about the development of key technologies in China, including control of such technologies and resources as well as supporting domestic enterprises.

It is critical to identify regulatory approvals required for a transaction early in the evaluation process and assess transaction restrictions. Additionally, where regulatory approvals are required, it is essential to proactively engage with regulators early in the process as well as, in some cases, with local non-governmental stakeholders such as industry associations.

International buyers should assess the impact of regulatory approvals (eg, merger control, the NSR, sector-specific reviews) needed in China early in the process, especially if the businesses involved operate in regulated sectors in China.