Specifically speaking, the negative effect of foreign M & A mainly manifests in the following two points:

　　Firstly, the foreign capital has entered China by the way of acquire the leading companies in domestic market, which has become the most popular approach that the foreign investors undertake investment in China. Most people are worried that the foreign companies, with their strong financial support, advanced technology and management, will easily defeat their Chinese competitors and become monopoly in the market.

　　According to the practice of China, the foreign M & A has showed four characteristics since 1990s: 1） The foreign companies begin to seek dominant holding status, for instance, Kodak America holds 70% of China''s film market after its M & A towards companies in China. 2） Regional, industry-wide and group-wide M & A is not uncommon any more, such as the car industry and the pharmaceutical industry. There are 7 companies in which the foreign companies have over 51% share holdings, and among the biggest 13 companies in China''s pharmaceutical industry, 5 companies are held by foreign companies that hold 50% of their shares, only one of the companies is held by China itself. 3） Foreign companies have turned their targets on the most influential Chinese companies in each field. Carlyle America used 375,000,000 U.S. dollars to acquire 85% of Xugong''s shares; German Schaeffler spent 1.1 billion to acquire Luozhou Company and so on, all of which targeted domestic leading companies in their respective fields. And now, foreign companies investing in China have gradually developed an initial market monopoly in some fields by merging big companies in China. 4） Big transnational corporations begin to join in merging and acquiring domestic companies. At the beginning of China''s reform and opening-up, in order to seize the market, the transnational corporations didn''t take the target too seriously, they only merge and acquire generic companies. But now, the transnational corporations turn their eyes to the "big" companies in China in order to carry out their global strategy and their pursuit of higher profits. As the data shows, 80% of the large supermarket chain stores in China''s big cities are held by foreign capital, and some transnational corporations, such as the Microsoft and Tetra Pak packaging, even dominate as large as 95% of the relevant market. So we can see that the foreign M & A have great influence on the market structure, and it is indeed easy for the foreign corporations to form a market monopoly power.

　　Secondly, in the long run, the M&A by foreign investors have the possibility to cause negative impact on China''s economy, fostering excessive dependency on foreign capital. The report entitled "the Behaviour of Limiting Competition by Multinational Corporations in China and the Countermeasures", issued by the State Administration for Industry and Commerce in 2004 demonstrates this negative influence. At present, the fundamental question is, mergers and acquisitions by multinational corporations which have influence on China''s market competition have not obtained adequate attention. In industries such as mobile phone, computer, IA servers, network equipment, computer processors, the multinational corporations enjoy absolute monopoly status in our country''s market. In China''s light industry, chemical industry, medicine, machinery, electronics and other industries, the multinational corporations take up over 1/3 of our country''s market shares. This is not conducive to the layout of China''s industrial policy when massive foreign capital may attack China''s national industry system, or threat China''s industry security and the economy security. In fact, in recent years, cases have occured that foreign capital discarded the national brand after their M&A, thus eliminating the national brand, which is another major drawback.