Rapid technological advances in information and communication technologies and their widespread diffusion have led some to speculate about "frictionless" economies where transaction costs are nearly zero, barriers to entry and contestability disappear and markets clear instantly.

China has become one of the world's leading destinations for foreign direct investment (FDI). However, while cross-border mergers and acquisitions (M&A) have become the dominant form of global FDI flows, they remain a relatively small part of FDI flows into China. In reviewing developments since...