China warns against ‘ir­ra­tional’ over­seas ac­qui­si­tions

Kuwait Times - - BUSINESS -

SHANG­HAI: China has urged do­mes­tic com­pa­nies to avoid “ir­ra­tional” over­seas in­vest­ments fol­low­ing a record-set­ting buy­ing spree that has wor­ried au­thor­i­ties about cap­i­tal out­flows and rash spend­ing. The re­buke car­ried by the Xin­hua news agency did not sin­gle out par­tic­u­lar firms but high­lighted ar­eas such as sports, ho­tels and en­ter­tain­ment where there have been ma­jor deals in­volv­ing Chi­nese groups.

“We ad­vise such com­pa­nies to make cau­tious de­ci­sions,” ac­cord­ing to a joint state­ment is­sued by the Min­istry of Com­merce and other agen­cies and pub­lished late Tues­day. “Reg­u­la­tory de­part­ments are also closely watch­ing the ir­ra­tional ten­dency in over­seas in­vest­ment in fields in­clud­ing real es­tate, ho­tels, cin­e­mas, en­ter­tain­ment, and sports clubs.” The wave of over­seas in­vest­ment this year has com­pli­cated ef­forts by Bei­jing to stem cap­i­tal out­flows, which are putting down­ward pres­sure on the yuan.

Chi­nese merg­ers and ac­qui­si­tions abroad in the first eight months of the year reached $61.7 bil­lion, sur­pass­ing those for all of 2015, of­fi­cial data showed re­cently. Among the more high-pro­file deals are Wanda Group’s pur­chase of Hol­ly­wood stu­dio Le­gendary for $3.5 bil­lion, as well as Lon­don-based Odeon & UCI cinema group in a deal worth around $1.2 bil­lion. The Chi­nese prop­erty-to-en­ter­tain­ment con­glom­er­ate also paid more than one bil­lion eu­ros for Swiss-based In­front Sports & Me­dia. Ap­pli­ance gi­ant Midea took over lead­ing Ger­man ro­bot­ics firm Kuka for $5 bil­lion, and in­surer-turned-hote­lier An­bang paid $6.5 bil­lion for 16 lux­ury prop­er­ties from hedge fund Black­stone.

Chi­nese com­pa­nies have in­creas­ingly gone abroad for in­vest­ment op­por­tu­ni­ties as do­mes­tic growth slows and the gov­ern­ment has en­cour­aged firms to seek tech­nol­ogy, re­sources and mar­ket ac­cess over­seas.

“One of the rea­sons reg­u­la­tors are do­ing this is be­cause the yuan (cur­rency) has been un­der de­pre­ci­a­tion pres­sure and it is hard to con­trol cap­i­tal out­flows,” said Li Ji­achao, mar­ket­ing di­rec­tor for merg­ers and ac­qui­si­tions ad­vi­sory firm DealGlobe. China’s for­eign ex­change re­serves plunged by $69 bil­lion in Novem­ber to $3.05 tril­lion, its fifth straight monthly con­trac­tion and the largest month-on-month de­cline since Jan­uary.


BEI­JING: A woman uses her mo­bile phone out­side a ho­tel in Bei­jing yes­ter­day.

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