Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  News

News :

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance ProfessionalsCalendarSectors 
The feature you requested does not exist. However, we suggest the following feature:

Chinese Investors Face New Roadblocks Investing Abroad

share with twitter share with LinkedIn share with facebook
share via e-mail
0
08/23/2017 | 08:15am CEST
By Emma Johanningsmeier 

After a record-breaking year for Chinese outbound M&A, Chinese investors are facing increasingly wary regulators in foreign governments -- and a Chinese government determined to control where they put their money.

China's total outbound M&A investing in the next decade could total $1.5 trillion, a recent report by international law firm Linklaters predicted. That is more than double the total from the past decade, according to Dealogic data, but is roughly flat when compared with current levels.

The first half of 2017 saw a total of $72.6 billion of outbound M&A from China, with Europe taking the largest share. That is far below Chinese outbound M&A in the first half of 2016, which hit a record-breaking $129.3 billion world-wide.

Among the forces driving this year's sober forecasts and sharp decrease are the Chinese government's crackdown on what it has described as "irrational" overseas deals, such as expensive real estate, that don't relate to investors' core businesses.

Although China hasn't discouraged outbound investing per se, it is applying a stricter standard of approving investments that support the national interest, according to James Stent, a banker and author of "China's Banking Transformation: The Untold Story."

"China's government now looks hard at overseas investments not arising out of core business strategies or serving national interests," Mr. Stent said. "It is restricting frivolous investments in overseas football teams, and by highly leveraged financial conglomerates whose acquisitions neither clearly serve the national interest nor arise out of a well-defined core business strategy."

On Friday, Chinese officials published official guidelines for overseas investment for the first time. The new rules will restrict investment in sectors such as hotels and sports teams, but not technologies such as computer chips.

Also likely to influence Chinese M&A investing patterns, however, are Western governments' moves to block Chinese companies from gaining too much control over domestic infrastructure and branching into industries where Chinese ownership might raise national security concerns.

Chinese forays into sectors such as energy infrastructure, high-end technology, and electronics face particular scrutiny abroad, the Linklaters report said. In one high-profile case, Australia blocked China's State Grid Corp. and Hong Kong-based Cheung Kong Infrastructure Holdings Ltd. from taking a 50.4% stake in the country's largest electricity network, Ausgrid, out of concerns for national security. At the time, Australian Treasurer Scott Morrison said "In making this decision, national-interest concerns have been paramount."

The range of companies likely to face resistance over security worries also includes payment processing systems and credit ratings systems, firms which might allow Chinese companies gather consumer data.

"I think we're going to see a lot of concern about ultimate ownership" of such companies, said Ken DeWoskin, a senior adviser for Deloitte's Chinese Services Group.

In the U.S. this year, several deals have failed to get timely approval from the Committee on Foreign Investment in the U.S. A $1.2 billion purchase of Dallas-based payment firm MoneyGram International Inc. by Ant Financial Services Group, which is controlled by Chinese billionaire Jack Ma, a co-founder of Alibaba Group Holding Ltd., and a bid by China's HNA Group to buy a controlling stake in former White House communication director Anthony Scaramucci's hedge-fund investment firm, SkyBridge Capital are among those deals.

In an op-ed column in The Wall Street Journal, U.S. Secretary of Commerce Wilbur Ross wrote "many governments across the globe have pursued policies that put American workers and businesses at a disadvantage," and added "For these governments, President Trump and his administration have a clear message: It is time to rebalance your trade policies so that they are fair, free and reciprocal."

Some European lawmakers have raised concerns about increased Chinese investment in Europe, citing a lack of reciprocity for European companies investing in China as one problem with the trend. But at an EU summit in June, lawmakers rejected French President Emmanuel Macron's proposal to give Brussels more control over foreign investments in Europe.

At a national level, Germany, the target of many Chinese investors, has recently expanded its government's ability to block the takeover of German companies by investors outside the European Union.

Heavy financial backing from the Chinese state for outbound acquisitions that advance its economic priorities, including targeted acquisitions of core technologies and important parts of the global value chain, enables Chinese investors to make attractive offers abroad, said Björn Conrad, vice president of the Berlin-based Mercator Institute for China Studies. But he cautioned that state backing can create market distortions which skew the competition in Chinese investors' favor.

"That's nice for the company that is being acquired -- they get a good deal," Mr. Conrad said. "But it's bad for the overall macroeconomic structures."

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news
08:14a Investment Into VistaJet Values the Business in Excess of $2.5 Billion
08:12a Strong euro leads big bond buyers into government debt rethink
08:10a WPP : cuts sales forecast on weak client demand
08:09a HYUNDAI HCN : 2017's top fuel-efficient gas-electric hybrid
08:08a NIPPON SHINYAKU : New Drug Application Filed for Glycoengineered Type II Anti-CD20 Monoclonal Antibody, Obinutuzumab
08:08a GEORGIA HEALTHCARE : GHG will hold Investor Day on 10 November
08:08a COSTAIN : Half-year Report
08:08a CHUGAI PHARMACEUTICAL : New Drug Application Filed for Glycoengineered Type II Anti-CD20 Monoclonal Antibody, Obinutuzumab
08:08a LG : Next Major Smartphone from LG to Feature First-Ever OLED FULLVISION Display
08:08a KENNEDY WILSON EUROPE REAL ESTATE : Form 8.3 - Kennedy Wilson Holdings
Latest news
Advertisement