The Ministry of Commerce plans to keep a closer eye on foreign mergers and acquisitions in important sectors to ensure the country's industrial and economic integrity, an official said in Beijing on Friday.

Song Heping, deputy director of the Ministry's Industrial Damage Investigation Department, made the remarks on Friday while commenting on the controversial takeover deal between the Carlyle Group of the United States and the Xugong Group, China's construction machinery giant.

Under the takeover agreement inked by the two parties last October, Xugong Group is to sell 85 percent of shares of its subsidiary Xugong Group Construction Machinery Co. to Carlyle at US$375 million. The Chinese machinery giant with annual revenues of 17 billion yuan (US$2.1 billion), controls more than 50 percent of China's crane and road paving equipment market.

Song wouldn't say if the deal had been approved by the Ministry of Commerce which is responsible for examining and approving major acquisition and merger deals in China.

Sources close to the deal said that the takeover has been stalled by the ministry for fear that it might jeopardize China's machinery industry.

The official said foreign acquisitions of the country's leading companies are "a new problem China has to face while advancing economic reform and opening up", adding that the ministry was trying to balance the protection of the country's indigenous industries with the investment enthusiasm of foreign companies.

(Xinhua News Agency July 8, 2006)