Belt and Road acquisition surge

Further investment in B& R countries encouraged

Mergers and acquisitions ( M& As) by Chinese companies in countries that are part of the Belt and Road ( B& R) initiative are soaring, even as overall outbound investment has been falling following a crackdown on irrational investments in overseas projects.

Chinese acquisitions in the 68 countries participating in the B& R initiative totaled $ 33 billion as of Monday, surpassing the $ 31 billion tally for all of 2016, according to Thomson Reuters data.

The surge in Chinese companies’ acquisition- linked investments in countries along the B& R routes comes as the volume of all outbound M& A deals from China has dropped 42 percent year- on- year as of Monday, the Thomson Reuters data showed.

Regulators have tightened the screws further since June, reviewing deal agreements in minute detail and ordering a group of lenders to assess their exposure to offshore acquisitions by several big companies that have been on overseas buying sprees, including HNA Group, Dalian Wanda Group and Fosun Group.

The scrutiny, however, has not impacted Chinese companies’ pursuit of targets along the B& R routes.

“People are taking a long- term approach when making investments in B& R countries,” said Hilary Lau, a corporate and commercial lawyer and partner at the law firm Herbert Smith Freehills.

“The acquisitions are also policydriven. There are funds allocated by Chinese banks and State funds for B& R deals,” he said.

The number of Chinese deals in countries along the B& R routes totaled 109 this year, compared to 175 in the whole of last year and 134 in 2015, the Thomson Reuters data showed.

The largest deal in a B& R country so far this year was a Chinese consortium’s $ 11.6 billion buyout of the Singapore- based Global Logistics Properties.

Other top deals include the $ 1.8 billion purchase of an 8 percent stake in an Abu Dhabi oil company by the State- owned oil giant China National Petroleum Corp, and HNA Group’s $ 1 billion acquisition of a logistics company, CWT Ltd, which has not yet been finalized.

The State Administration of Foreign Exchange, China’s foreign exchange regulator, said this month that domestic firms would be encouraged to participate in B& R activities.