One of the overarching themes in my FDI Law class is the importance of understanding government policy. A lawyer can be quite competent just by learning the law, but if that lawyer can also understand government policy and its relationship to the content of laws and regulations, he/she can be a real expert. It’s also fun stuff to learn, in my humble opinion.

Today was my second lecture on mergers and acquisitions. The government policy part of the discussion covered quite a bit of territory, including exchange rate policy, economic growth, managing asset bubbles, and safeguarding against the poaching of State-owned assets.

In particular, I talked about the government’s use of M&A to reform the State-owned sector, which generally means consolidation, modernization, trimming capacity redundancies in a number of “critical industries,” and then attracting foreign investment to help with overseas business and learning new management techniques. This approach has been used for many years now, with some successes.

It’s nice to know, however, that the policy issues I am discussing in class are not just historical footnotes, but things that are still driving current M&A deals.

So I was happy to see this in my Inbox this evening:

The state parent of China’s Chang’an Automobile Group Co agreed yesterday to take over five vehicle units of the Aviation Industry Corp of China to form a new automotive giant.

The deal – the biggest merger between China’s state-owned auto companies – is further evidence that the central government is moving ahead with plans to consolidate the industry and create several globally competitive car makers. (Shanghai Daily)

And then there’s this:

China will encourage mergers and restructuring in the steel sector to help forge three to five producers with sharp international competitiveness, said the Ministry of Industry and Information Technology in a statement on its website Tuesday.

A total of six to seven leading steel producers will be encouraged to implement strategic mergers and restructuring across the country, according to the Guideline to Promote Steel Sector Mergers and Restructuring.

The guideline was made to tackle domestic steel sector’s structural problems like low industry concentration and high percentage of backward production capacity, the statement said. (Xinhua)

At the risk of being self-congratulatory (but what the hell), I gave a few examples of industry sectors targeted by this policy and identified as “critical industries”: two of them were steel and autos.

Not a bad day in the classroom.