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1. Introduction
After the global financial crisis in 2008, China has played an important role in contributing to the world’s economic growth, which provides a historical opportunity for Chinese companies’ cross-border acquisitions while most countries were experiencing economic depression. According to the statistics published by Ministry of Commerce of the People’s Republic of China, from 2008 to 2011, acquisition activity led by Chinese enterprises totaled US$106.3bn, which achieved an average annual growth rate of 44 per cent. China has become the world’s fifth largest foreign investment country in 2012, overseas non-financial direct investment reached US$77.22bn, which was the highest level in the past seven years. Cross-border acquisitions have become a dominant mode of international market entry for Chinese firms in post-financial crisis era. But at the same time, the failure rate of China’s overseas investment and acquisitions is also increasing year by year (Zhang et al., 2010), according to the report made by “Financial Times” on January 30, 2011, the failure rate of Chinese enterprises’ cross-border acqusitions on 2009 and 2010 are 12 and 11 per cent, respectively, a huge comparison between USA and UK’s 2 per cent. Many of them were obstructed by foreign governments on the ground of “Threating National Security”. For example, Aluminum Corporation of China failed attempt to acquire Rio Tinto in 2009, and Beijing Excellence Airlines unsuccessfully bid for US aircraft maker Hawker Beech in 2012. Both of deal applications were dismissed by foreign governments given the reason as “may endanger the national security”.
The above-mentioned failures of Chinese enterprises’ cross-border acquisitions are closely related with the increasingly rigorous foreign merger and acquisition security review system. In 2005, an amendment to the Canadian Investment Act was enacted by the Canadian Government to provide a mechanism to review foreign investments related to national security issues. French government listed 11 categories of “Strategic Industries” as the objects of national security review in 2005 and set up a “Strategic Investment Fund” in 2008 to prevent significant local companies from foreign acquisitions when their stock prices fall sharply. In 2007, the promulgation of the Foreign Investment and National Security Act enlarged the scope of national security screening in the USA. The National Security Review Act enforced in Germany in 2009 strengthened the...