Completion of the deal has been slowed because the company's products contain glass, which may be classified as a strategic material.
``We're told by the lawyers we may have to get special approval because the product uses a lot of glass,'' says Colling, 55, who is based in Shanghai and wouldn't name the companies involved since talks are continuing. ``Larger, more visible deals are going to be more difficult to get done.''
New takeover rules in China are crimping overseas buyout funds such as Carlyle Group and Ewing Management after lawmakers criticized the government for selling state assets too cheaply. Private equity and venture capital firms this year had raised $27.3 billion to invest in Asia as of Oct. 17, up from $23.2 billion in 2005, according to the Asian Venture Capital Journal.
``There appears to be a new sense of domestic nationalism -- under the guise of protecting national economic security -- which may have the effect of restricting foreign investment,'' says James M. Zimmerman, chairman-elect of the American Chamber of Commerce China.
Almost 70 percent of the $19.5 billion of acquisitions announced by overseas investors this year in China have yet to be completed, according to data compiled by Bloomberg. Last year, all but 25 percent of the $34.4 billion in purchases were cleared.
The country's nascent domestic private-equity industry, bolstered by new laws and state-sponsored funds, may get a boost from the restrictions on overseas investors, says Liang Meng, co- head of China investment banking at JPMorgan Chase & Co., which advised on six acquisitions in China this year.