Banks and M&A in China: An Analysis of Chinese Banking System as a Catalyst for the Development of One of the World's Most Promising Markets

The paper deals with Chinese banks and in particular the role Chinese banks have in the development and functioning of those particular corporate transactions collectively defined as "mergers and acquisitions" (M&A). M&A transactions have a close and complex interconnection with banks, firstly because in most cases such transactions cannot be implemented without the financial leverage (so-called, acquisition financings). Moreover, banks often do not simply assist the entities involved in mergers and acquisitions, but have a primary role, either as acquirers, targets or parts of the merger. As a result of the unprecedented growth of the Chinese economy in the last three decades, mergers and acquisition activities have proliferated in China. Similarly to what happened to the so-called "real economy, M&A transactions have also evolved much faster than the way they previously did in today's developed countries and, in just a couple of decades, such transactions reached a degree of structural complexity and sophistication comparable to those implemented in Europe or the United States, to refer to the two biggest M&A markets. Such a growth of M&A activities is even more impressive when looking at the Chinese banking system, which, notwithstanding the great improvements, remained greatly undeveloped, backward and incapable of efficiently assisting companies in their expansion. Furthermore, even if the banking system itself was more developed, several restrictive laws and regulations would prevent it from contributing further to the growth of mergers and acquisitions.