Impacts of Trade Protection upon China's Outbound M&A in the Global Financial Meltdown

Protectionist pressures have been mounting worldwide since 1980s due to the large and persistent balance of trade deficit in the United States, and grow even greater in the global financial meltdown. Moreover, the pressures are spreading over movement of products and capital. In this article we apply a term “Spreading Trade Protection (STP)” to the situation under which the governments concerned take the advantage of inconsistency between national interests and economic interests to prevent foreign enterprises from entering the domestic markets. In fact, as an irrational block to free trade and free capital mobility, STP has fortified the imbalance of interest allocation between groups with advantages in factor endowment or in industrial transfer. The authors compare the features and implications between traditional trade protection and STP, identifying the protection range of STP beyond the traditional ones. To explore the underlying motives of various interest groups abroad to adopt STP over China’s overseas M&A, the authors probe into the mechanism of STP, infer the major courses of STP in terms of China’s overseas M&A. In addition, the authors go further to investigate the impacts of STP on China’s overseas M&A and figure out the countermeasures in the financial crisis. Keywords-Foreign direct investment,Merger and Acquisition (M&A),Spreading Trade Protection (STP)