When Deng Xiaoping opened the Chinese economy to foreign investors in the late seventies, he paved the way for regulations permitting ventures between Chinese and foreign companies. Those regulations however, did not go so far as to permit foreign players to engage in cross-border activities. Foreign companies were effectively locked out from making investments if they did not have a physical presence in China.
The next decade of economic liberalization resulted in big increases in the number of foreign invested enterprises (FIEs) being established. They took the form of equity joint ventures (EJV), cooperative joint ventures (CJV), or wholly foreign-owned enterprises (WFOE).
In the wake of these changes, regulations were adopted that set the stage for joint venture companies to be established through M&A transactions. A regulatory framework for these activities was created, where none existed before.
China's accession to the World Trade Organization in 2001 has helped...