Inbound M&A cases surpass outbound in China for first time in a decade

Newly announced foreign merger and acquisition (M&A) deals into China surpassed Chinese outbound deals in terms of both volume and value for the first time in a decade in the first five months of this year, according to research by Baker McKenzie and Rhodium Group.

Relaxation of foreign investment regulations and a generally optimistic forecast on the outlook for China’s economy might be the driving forces, experts said.

According to Baker McKenzie, the first five months of this year saw announced foreign M&A into China total $9 billion, despite overall stagnant outbound investment.

By contrast, overall outbound deals dropped about 71 percent in volume and 88 percent in value, year-on-year. From January to May, only 30 transactions were announced per month, compared with 90 per month from 2016-19.

Despite the hit taken by China’s consumption, the overall outlook for China’s economy remains optimistic, given the country’s effective containment of the coronavirus and an early recovery, Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Monday.

“With fundamentals such as the rise of the middle class, and the speedy recovery from the economic lockdown, foreign companies are still betting big on the Chinese market.”

In the first quarter, several big foreign companies conducted sizable deals in China. In February, US beverage bellwether Pepsi acquired Chinese snack brand Be & Cheery’s for $700 million.

Foreign companies are also being encouraged to invest in China by a relaxation on regulations.

China’s outbound buying, however, is facing increasingly tough regulations.

Governments in many Western countries including Spain, France and Australia have been introducing rules intended to limit foreign acquisitions to protect assets in their own countries.

Consequently, outbound deals made by Chinese firms in Europe and the US are in sharp decline.

Chinese outbound M&A deals from January to May fell 93 percent to $1.4 billion in Europe and fell 89 percent to $700 million in North America.