Illegal outflow of capital must be stopped
Enterprises transferring assets tions. In fact, some Chinese enterprises’ enterprises to transfer their assets abroad their illegally amassed wealth is difficult abroad should be put under close M&A efforts have already made foreign while undertaking all the potential risks. to recover, which is a huge loss for the supervision, and the authorities enterprises and investors cautious, and Soccer is as popular in China as in any country. already realize that. even prompted some foreign governother country. Some Chinese clubs spend So the authorities must also pay attenPan Gongsheng, vice-governor of Chiments to take precautionary measures exorbitant amounts to buy overseas playtion to the flow of money today, because na’s central bank, has warned that some against Chinese enterprises’ acquisition ers while some enterprises invest tens of containing the excessive outflow of capital Chinese enterprises, with a high debt ratio bids. millions of dollars to buy foreign soccer now is saving the country from potential at home, borrowed large sums of money Complicating the matters is some Chiclubs, or their shares. Even if some of losses in the long run. last year to acquire overseas companies, nese enterprises’ poor financial capacity these transactions do meet market Those Chinese enterprises that have the including football clubs, and a few transto strike M&A deals overseas, as they demands, they could create bubbles. It is financial strength to seek M&A deals ferred their assets abroad under the guise mostly rely on raising debts at home for not hard to tell the true intention of the abroad should be encouraged to do so. of direct investment. this purpose. Some enterprises spend all Chinese enterprises that spare no effort to But enterprises with unsatisfactory track
Previously, the government mainly their energies in overseas M&A bids acquire overseas enterprises or soccer records should be thoroughly scrutinized blocked the hidden channels, cracked despite their asset-liability ratios revealclubs despite their extremely tight capital before being allowed to bid for overseas down on organizations engaged in covert ing their incapacity to strike such deals. position at home. companies, because most of such deals transactions to prevent the outflow of So it is up to the relevant financial agenThe Communist Party of China, under result in a flight of capital from the councapital, and largely succeededtry.incontain-cies,mainlyChinesebanks,toascertaintheleadershipofXiJinping,hasdonea ing the illicit transfer of assets. such enterprises’ true strength before remarkable job of hunting down corrupt he wealth the Chinese people make at
But new problems have emerged, as an lending them money. officials who had fled abroad. But even if home through hard work must not be increasing number of Chinese enterprises Or else, they will end up helping these the corrupt officials are caught, most of transferred abroad by dubious enterprises have hastened their “going-out” pace to and corrupt officials. Therefore, the acquire overseas companies and open up authorities must keep a close eye on debtmore channels for transferring capital to ridden enterprises that spend a lot of bormore countries and regions. rowed money to buy overseas
Pan’s warning highlights the seriouscompanies that are irrelevant to ness of the problem, as excessive capital their known business activities. outflow not only leads to the loss of Moreover, the law-enforcesocial wealth, but also has a negative ment agencies and auditimpact on overseas mergers and acquisiing departments should strengthen their supervision and vigilance, and strictly monitor all overseas M&A bids — by both private companies and State-owned enterprises — to protect the country’s wealth from being squandered abroad.
The author is a columnist for Beijing Youth Daily. The article was first published in that newspaper on March 22.