Deloitte re­port down­plays the im­pact of cap­i­tal out­flow con­trols on health­care

China Daily (Hong Kong) - - BUSINESS - By MENG FANBIN meng­fan­bin@chi­nadaily.com.cn

De­spite re­cent con­trols on cap­i­tal out­flows, Chi­nese health­care and life sci­ence com­pa­nies will con­tinue to find am­ple op­por­tu­ni­ties for merg­ers and ac­qui­si­tions or M&A abroad, ac­cord­ing to a re­port by Deloitte Touche Tohmatsu, one of the “Big Four” global ac­count­ing firms.

The re­cent slow­down in health-re­lated M&A notwith­stand­ing, Chi­nese over­seas in­vest­ments will ac­cel­er­ate, es­pe­cially in med­i­cal equip­ment and re­lated ser­vices, given the in­ad­e­quate re­search and de­vel­op­ment ca­pa­bil­i­ties at home, ex­pec­ta­tions of the ren­minbi’s de­pre­ci­a­tion and over­val­ued do­mes­tic M&A tar­gets, said the DTT re­port.

Lo­cal en­ter­prises with suf­fi­cient cap­i­tal will seek to go out for in­vest­ment op­por­tu­ni­ties, and to ex­plore over­seas mar­kets, ac­quire ad­vanced tech­nolo­gies, en­rich their prod­uct lines, ex­tend their in­dus­try chain and en­hance their brand im­age, it said.

Si­mon Li, a coun­selor at An­jie Law, said con­trols on cap­i­tal out­flows are meant to rein in ir­ra­tional or spec­u­la­tive over­seas in­vest­ments in real es­tate, ho­tels, en­ter­tain­ment and sports clubs. So, such poli­cies won’t af­fect the health­care in­dus­try much.

The Chi­nese gov­ern­ment is keen on the de­vel­op­ment of the health­care in­dus­try

value of out­bound M&A by Chi­nese phar­ma­ceu­ti­cal com­pa­nies in 2016

The Belt and Road Ini­tia­tive en­cour­ages Chi­nese com­pa­nies to go global, in­vest abroad and co­op­er­ate with for­eign com­pa­nies, the DTT re­port said.

But, since the se­cond half of last year, the gov­ern­ment tight­ened scru­tiny of out­bound in­vest­ment pro­pos­als. Such pro­pos­als were sub­jected to height­ened reg­u­la­tory scrunity in for­eign coun­tries as well.

For in­stance, on July 31, news agen­cies such as Bloomberg and Reuters re­ported that In­dia may re­ject Shang­hai Fo­sun Phar­ma­ceu­ti­cal Group Co’s pro­posed $1.3 bil­lion takeover of an In­dian drug­maker, Hy­der­abad­based Gland Pharma Ltd.

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