China Expands M&A Loan Policy to Support Minority Equity Deals
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China is overhauling its merger and acquisition (M&A) loan framework, allowing banks to finance minority stake deals for the first time in a policy shift aimed at boosting corporate restructuring and investment.
On Wednesday, the National Financial Regulatory Administration released a draft regulation on commercial bank M&A loans, opening the door for loans supporting “equity participation” transactions. These loans will support buyers acquiring stakes of at least 20% in target firms without taking control. If an investor already holds 20% or more, additional loans can be used to boost the stake further, provided each deal adds at least 5%.
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- China proposes allowing banks to finance M&A deals for minority stakes (at least 20%), widening from prior rules requiring control.
- The new framework sets higher asset thresholds for minority-stake M&A loans (100 billion yuan) than control-based ones (50 billion yuan), with financing capped at 60% and 70% respectively.
- The draft, released by the National Financial Regulatory Administration, is open for comment until September 20, 2025, covering all domestic commercial banks.
- Eastern Airlines Industry Investment Co. Ltd.
- Eastern Airlines Industry Investment Co. Ltd. received a 1.95 billion-yuan loan from Agricultural Bank of China's Shanghai branch in 2019. This enabled them to acquire a 15% stake in Juneyao Air. This deal was a special approval case ahead of the new M&A loan framework.
- Juneyao Air
- In 2019, Eastern Airlines Industry Investment Co. Ltd. used a 1.95 billion-yuan loan from Agricultural Bank of China's Shanghai branch to acquire a 15% stake in Juneyao Air. This deal was a significant instance of minority-stake financing, allowed on a case-by-case basis.
- 2008：
- M&A loans were introduced in China, becoming the only credit tool in China's banking system that can directly support equity financing.
- 2015：
- Regulators extended M&A loan maturities from five to seven years and raised the financing cap from 50% to 60%.
- 2019：
- Agricultural Bank of China’s Shanghai branch issued a 1.95 billion-yuan loan to Eastern Airlines Industry Investment Co. Ltd. to buy a 15% stake in Juneyao Air, under special approval.
- 2020：
- Wang Junlin from Agricultural Bank of China's investment banking division wrote that regulators could consider phased rollouts of minority-stake M&A loan policies.
- By end of 2024：
- The asset thresholds for issuing M&A loans—50 billion yuan for control-based and 100 billion yuan for minority-stake loans—are calculated based on asset size at the end of the previous year.
- March 2025：
- Regulators trialed looser rules for tech-sector M&A, allowing up to 80% bank financing and 10-year terms.
- August 21, 2025：
- The National Financial Regulatory Administration released a draft regulation on commercial bank M&A loans, allowing minority-stake deal financing for the first time.
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