Un­cer­tain­ties may slow out­bound M&Aac­tiv­i­ties

China Daily (Canada) - - XI’S VISIT - By LI XIANG lix­i­ang@chinadaily.com.cn

Chi­nese com­pa­nies will likely con­tinue to be a ma­jor driver of cross-bor­der merg­ers and ac­qui­si­tions this year, but their out­bound in­vest­ment ac­tiv­i­ties may grow at a slower rate as a re­sult of the ris­ing num­ber of po­lit­i­cal and eco­nomic un­cer­tain­ties in­ter­na­tion­ally, ac­cord­ing to an­a­lysts.

In the first three quar­ters of 2016, China be­came the big­gest ac­quir­ing na­tion in global cross­bor­der M&A for the first time. Chi­nese com­pa­nies com­pleted 671 out­boundM&Adeals worth a to­tal of $164.3 bil­lion, nearly triple the amount dur­ing the same pe­riod in 2015, ac­cord­ing to a re­cent re­port by the multi­na­tional ac­coun­tancy firm Price­wa­ter­house­Coop­ers.

The largest deal last year was the $43 bil­lion ac­qui­si­tion of Syn­genta, the Swiss pes­ti­cides and seeds group, by China Na­tional Chem­i­cal Corp, a State-owned chem­i­cals gi­ant.

Based on 2016 cor­po­rate re­sults, an­a­lysts said China’s out­bound in­vest­ment will con­tinue to grow, but com­pa­nies may face greater un­cer­tain­ties as is­sues such as the Brexit ne­go­ti­a­tions, the pres­i­dency of Don­ald Trump and elec­tions in Europe dom­i­nate the news cy­cle.

“China’s out­boundM&Aac­tiv­i­ties prob­a­bly won’t con­tinue their high growth rate in 2017 be­cause of the un­cer­tain­ties,” said Jen­nifer Zhang, a fi­nan­cial re­searcher at deal data provider Merg­er­mar­ket.

“The con­trol on cap­i­tal out­flows, against the back­drop of a weaker yuan, is also mak­ing com­pa­nies think twice about their out­bound M&A strate­gies,” she added.

Given the eco­nomic and po­lit­i­cal un­cer­tain­ties in the world’s de­vel­oped economies, some an­a­lysts said Chi­nese com­pa­nies should di­ver­sify their over­seas in­vest­ments and pay more at­ten­tion to projects in emerg­ing mar­kets.

Zhang Xiangchen, China’s deputy in­ter­na­tional trade rep­re­sen­ta­tive, said the coun­try should broaden its over­seas trade and in­vest­ment chan­nels, with a fo­cus on coun­tries in­volved in the Belt and Road Ini­tia­tive.

Be­tween Jan­uary and Novem­ber 2016, China’s out­bound di­rect in­vest­ment to coun­tries and re­gions along the pro­posed route of the Belt and Road reached $13.35 bil­lion, ac­count­ing for 8.3 per­cent of the coun­try’s to­tal ODI value dur­ing the pe­riod, ac­cord­ing to data from the Min­istry of Com­merce.

Huo Jian­guo, vice-chair­man of theChina So­ci­ety forWorldTrade Or­ga­ni­za­tion Stud­ies, said Chi­nese com­pa­nies should care­fully con­trol the pace of their over­seas in­vest­ments in the more com­plex and volatile global eco­nomic en­vi­ron­ment.

“To avoid in­vest­ment losses, com­pa­nies should have a sound and com­plete in­vest­ment plan with deep knowl­edge of the po­lit­i­cal, le­gal and busi­ness en­vi­ron­ment of the des­ti­na­tion coun­try,” he said.

China’s top lead­ers wrapped up the three-day Cen­tral Eco­nomicWork Con­fer­ence on Dec 16. At the tone-set­ting meet­ing, pol­i­cy­mak­ers mapped out pol­icy stances for the coun­try’s eco­nomic devel­op­ment in 2017. China Daily an­a­lyzes the tasks and chal­lenges China will face in 2017, to pro­vide an in­sight into how the world’s se­cond-largest econ­omy will tackle thorny re­struc­tur­ing and re­form chal­lenges.

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