The Chinese government's new takeover rules may spur mergers and acquisitions in the world's fourth-largest economy, by removing ambiguities and lowering the bar for buying another company.

Investors that acquire more than 30 percent of a listed company, triggering a mandatory gen-eral offer, will be allowed to buy as little as 5 percent of the remaining shares rather than the entire outstanding stock, under rules released yesterday by the China Securities Regulatory Commission. The regulator codified for the first time the rules governing takeovers.

The rules are more "precise and detailed"because the commission is anticipating more merg-ers and acquisitions.

The pace of acquisitions in China's US$435 billion stock market is picking up after the gov-ernment implemented a plan last year to make all state-owned shares publicly tradable. About two- thirds of listed company shares were non-tradable before the program, limiting the scope for takeovers.

The securities regulator is trying to bring the nation's capital markets more in line with global practices, almost five years after China joined the World Trade Organization. Mergers and acquisitions by overseas and local companies in China jumped 34 percent to US$46.4 billion in 2005, led by US$12 billion of investment in the country's banks.

"Mergers and acquisitions can effectively strengthen listed companies' competitiveness and boost their value,"the Beijing- based commission said in a statement. The rules offer acquir-ers more options and help to lower their takeover costs, the statement said.

Jinan Iron & Steel Group and Laiwu Iron & Steel Group Co., both based in the eastern prov-ince of Shandong, plan to merge to create the country's second-largest steel producer, their publicly traded units said yesterday. The government is seeking to encourage consolidation in the steel industry.

China Eastern Airlines Corp., the nation's No. 2 carrier by fleet size, said on July 21 that it's in talks with possible investors including Singapore Airlines Ltd. China Eastern is listed on the Shanghai Stock Exchange and in Hong Kong.

The number of merger and acquisition deals in China this year will exceed last year's 857, PricewaterhouseCoopers said in a Jan. 24 report, although the total value is expected to drop.

"The rules will make it easier for non-listed companies to buy listed companies,"said Zhang Hongyu, general manager of HollyHigh International Capital Co. in Shanghai.

The regulator issued 90 rules on takeovers by listed Chinese companies. Under the rules, ac-quisitions must be in industries approved by the government and which won't "endanger na-tional security or hurt the public interest."The regulator will set up a committee to seek ad-vice from relevant government departments to determine whether a planned acquisition is allowed.

Carlyle Group, a Washington-based buyout fund, is still awaiting government approval after agreeing to buy 85 percent of Xugong Group Construction Machinery Co., the nation's big-gest maker of building machinery, for US$375 million in October. China's cabinet said on June 29 that the nation should retain control of "big, key equipment manufacturers."Xugong has a listed unit.

The revised takeover rules may boost the number of deals and help the securities industry, which is recovering after a four-year slump caused by lax supervision and a series of account-ing and corruption scandals at listed companies and brokerages.

The government lifted the ban on share sales earlier this year, enabling the nation's 120 bro-kerages to resume earning fees from arranging public offerings.

Under the new rules, the acquirer must hire a financial adviser registered in China and who will assess the financials of both parties and the planned acquisition, the statement said.

The acquirer can't sell stakes in the listed acquired company for a year after the deal is com-pleted, the rules state.