Compared with older foreign investment laws and regulations (especially Certain Regulations on Changes to Shareholders' Rights in Foreign Investment Enterprises promulgated on May 28, 1997 and Provisional Regulations on Utilization of Foreign Investment for Restructing of State-owned Enterprises promulgated on November 8, 2003), the Provisional Regulations have the following features:
　　I. The main purpose of the Provisional Regulations is to attract foreign investors to engage in the reconstruction and reformation of domestic enterprises, so the term "domestic enterprise" mentioned in the Provisional Regulations has special meaning and it refers to the enterprise incorporated in Mainland China without foreign investment other than foreign investment enterprise.
　　II. The Provisional Regulations adopts generally recognized practices of transnational merger and acquisition and concludes two kinds of merger and acquisition: merger by equity and merger by assets. In accordance with the Provisional Regulations, foreign investors may merger domestic enterprises by purchasing equity from shareholders of domestic enterprises or by purchasing assets from domestic enterprises.
　　III. For the purpose of full utilization of foreign investment to enhance the reconstruction and reformation of domestic enterprises, the Provisional Regulations provides that except where laws and regulations stipulate to the contrary, the ratio of foreign investment in the foreign investment enterprise established by merger and acquisition may be less than 25%, and necessary approval and registration procedures must be carried out.
　　IV. In reality there are many companies set up by Chinese individuals according to Company Law of the PRC, and these companies may become target companies of foreign merger and acquisition. In order to fully protect the legitimate rights and interests of Chinese individual shareholders, the Provisional Regulations recognizes the shareholder status of Chinese individual investors in the foreign investment enterprises established through merger and acquisition on condition that Chinese individual investors shall hold shareholder status in the mergered domestic company for at least one year.
　　V. Apart from the above provisions, the Provisional Regulations also regulates the anti-trust issue relating to merger and acquisition. If the Ministry of Foreign Trade and Economic Cooperation (now the Ministry of Commerce) and State Administration for Industry and Commerce hold that the merger and acquisition may impair fair competition or damage the rights and interests of consumers, the two departments may refuse to issue approval to foreign investors' application for merger and acquisition.

─Jason Ju