Foreign acquisitions of domestic enterprises on the Chinese industries now become the focus of attention, through the analysis of mergers and acquisitions development process of foreign investment in China, it is found that foreign mergers and acquisitions are beneficial in some areas. However, there have been a lot of issues, causing foreign investors monopoly to China's market. Irregular mergers and acquisitions process and lack of legal basis has resulted in a serious state-owned assets loss. Distortions in the foreign investment and preferential policies lead to a competition inequality for domestic enterprises. Finally, this work established and improved a system to attract foreign investment in the basic principles: higher prices for better quality, industrial safety and economic security, fair taxation; eventually established to promote the establishment of fair competition, create a favorable investment environment for mergers and acquisitions.