US firms’ M& A deals increasing
MOFCOM data contradicts Reuters report that mergers plunged in first half
Yuan- denominated merger and acquisition ( M& A) deals by US firms in China in the first six months of this year increased by 2.3 percent year- on- year, said Gao Feng, spokesman for the Ministry of Commerce ( MOFCOM), on Thursday.
The comment came after Reuters last week reported a sharp decline in M& A deals involving US firms during the period.
Citing its own data, Reuters reported on July 28 that M& A deals involving US participants in China declined 32 percent year- on- year to $ 523 million in the first half of 2017.
The Reuters report cited sources saying that potential trade tensions between the US and China and China’s regulatory uncertainties caused the drop.
“I am not familiar with the report. But statistics by the MOFCOM showed that the value of US firms’ M& A deals in China in yuan- denominated terms has continued to rise in recent years, except in 2015 when the value declined on a year- on- year basis,” Gao told the Global Times at a press conference on Thursday.
China always encourages foreign companies to invest in China via mergers and has further streamlined the approval process on mergers initiated by foreign firms in recent months, Gao said.
Yan Yiming, a Shanghaibased lawyer, said the contradiction in figures between the MOFCOM and the Reuters report could be due to differences in how statistics figures are compiled.
“But looking from a broad timeframe of 40 years since the reform and opening- up movement, foreign M& A deals in China are now slowing, and this is due to a fundamental shift in the mindset of foreign investors from treating China as a low- cost exports- oriented manufacturing base to a huge consumption- based market where production cost is rising,” Yan told the Global Times on Thursday.
Zhang Ning, a research fellow at the Chinese Academy of Social Sciences, said that in addition to rising labor costs, the cost in environmental and resource protection is surging.
“These reasons, rather than the potential trade tensions between the two countries or concerns over uncertainties over Chinese supervision and regulation, are what’s really behind a decline in US M& A value in China as reported by Reuters,” Zhang told the Global Times on Thursday.
“As China is fighting capital outflow and there is also pressure for the yuan to depreciate, the Chinese government for the moment will more than ever welcome foreign investors,” Zhang said.
Domestic investors are also seizing up good projects and competing with foreign investors, Zhang noted.
The Trump administration’s hint that capital should stay within the US and threats to punish those who invest abroad is another reason for the decline of outbound investment for US companies, Zhang said.