China puts brakes on overseas spending

BEIJING is tightening screening on Chinese companies’ overseas investments, according to the government and reports, after a record-setting shopping spree raised concerns of capital flight and reckless spending.

Authorities will “combine facilitating foreign investment with guarding against investment risks” by scrutinising proposed deals, the National Development and Reform Commission, the top economic planner, said in a statement posted on its website.

New restrictions will ban most deals over $10 billion and curb investments of more than $1 billion in sectors unrelated to a company’s core business, Bloomberg News reported, citing people with knowledge of the matter.

State-owned companies will be barred from spending more than $1 billion on overseas property and the rules will last until September 2017, it added.

Chinese firms have been on a multibillion-dollar spending spree this year, culminating in state-owned ChemChi- na’s $43 billion bid for Swiss seed giant Syngenta.

Property-to-entertainment conglomerate Wanda Group bought Hollywood studio Legendary for $3.5 billion, 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.

The tightening comes after authorities long urged private and state-owned enterprises to “go abroad” to buy for- eign brands, technologies and resources in search of better returns and technological know-how.

But increasing capital outflows from China have raised concerns with the yuan currency weakening against the dollar, hitting a nearly eight-year low this month.

China has spent hundreds of billions of dollars from its vast foreign exchange reser ves, t he world’s la rgest, i n it s efforts to keep the yuan from falling too rapidly.