China moves to curb overseas ac­qui­si­tions

Weekend Mirror - - CHILDREN’S CORNER -


im­poses re­stric­tions to try to stem global buy­ing spree that has in­cluded en­ter­tain­ment firms and foot­ball clubs.

Chi­nese businessman Gao Jisheng bought an 80% stake in Southamp­ton FC ear­lier this week.

The Chi­nese gov­ern­ment has served no­tice on the coun­try’s for­eign in­vest­ment spree in foot­ball clubs, sky­scrapers and Hol­ly­wood as it moves to curb ris­ing lev­els of debt among do­mes­tic com­pa­nies.

The an­nounce­ment of re­stric­tions in a range of sec­tors fol­lows a buy­ing spree around the globe dur­ing which Chi­nese firms and busi­ness ty­coons have taken con­trol of as­sets in­clud­ing Leg­endary En­ter­tain­ment, the US film pro­ducer be­hind Juras­sic World and War­craft, build­ings such as the Cheeseg­rater in Lon­don, and English foot­ball clubs in­clud­ing Southamp­ton and As­ton Villa.

The curbs were an­nounced in a doc­u­ment re­leased on Fri­day by the state coun­cil, China’s cabi­net, in the lat­est move to halt a string of for­eign ac­qui­si­tions. This week the In­ter­na­tional Mon­e­tary Fund de­scribed China’s credit-fu­elled eco­nomic strat­egy as dan­ger­ous, in a strongly worded state­ment warn­ing that the coun­try’s ap­proach risks fi­nan­cial tur­moil.

Rais­ing con­cerns that some of the com­pa­nies in­volved may be tak­ing on too much debt, the coun­cil said: “There are great op­por­tu­ni­ties for our na­tion’s com­pa­nies to em­bark on for­eign in­vest­ment, but they also face nu­mer­ous risks and chal­lenges.”

It added that through the new guid­ance, the gov­ern­ment hopes to pro­mote the “ra­tional, or­derly and healthy devel­op­ment of for­eign in­vest­ment while ef­fec­tively guard­ing against risks”.

The doc­u­ment l i mits overseas in­vest­ments in ar­eas such as ho­tels, cin­e­mas, the en­ter­tain­ment in­dus­try, real es­tate and sports clubs. It also bans out­right in­vest­ments in en­ter­prises re­lated to gam­bling and the sex in­dus­try. The Chi­nese gov­ern­ment had al­ready flagged ho­tels as an area of con­cern, hav­ing re­port­edly asked the in­sur­ance group An­bang to sell the Wal­dorf As­to­ria ho­tel in New York.

One of China’s big­gest con­glom­er­ates, Wanda Group, also bowed to pres­sure from the gov­ern­ment when it aban­doned the $1bn (£ 780m) pur­chase of the en­ter­tain­ment com­pany Dick Clark Pro­duc­tions ear­lier this year. In 2016 Wanda bought Leg­endary En­ter­tain­ment for $3.5bn, hav­ing be­come the world’s big­gest cin­ema op­er­a­tor in 2012 with its pur­chase of a ma­jor­ity stake in US chain AMC for $2.6bn.

At the same time, the doc­u­ment en­cour­ages com­pa­nies to plough money into projects re­lated to the “Belt and Road” pro­ject, Pres­i­dent Xi Jin­ping’s sig­na­ture for­eign pol­icy ini­tia­tive that seeks to link China with other parts of Asia and eastern Europe through multi­bil­lion-dol­lar in­vest­ments in ports, high­ways, rail­ways, power plants and other in­fra­struc­ture.

The Chi­nese gov­ern­ment has pledged to dou­ble the size of the coun­try’s econ­omy be­tween 2010 and 2020, lead­ing to rapid growth in non-fi­nan­cial sec­tor debt to help achieve its aim. To­tal debt has quadru­pled since the fi­nan­cial cri­sis to $28tn at the end of last year.

As part of his drive for stronger gov­ern­ment lead­er­ship over the econ­omy, Xi has been mov­ing to re­assert con­trol over top state en­ter­prises while rein­ing in sprawl­ing con­glom­er­ates such as Wanda, An­bang, Fo­sun In­ter­na­tional and HNA Group, which have ex­panded rapidly via debt-fu­elled for­eign ac­qui­si­tions.

China’s state plan­ner, the na­tional devel­op­ment and reform com­mis­sion, said on Fri­day it would pro­vide bet­ter guid­ance on risks to com­pa­nies in­vest­ing overseas in or­der to pre­vent “vi­cious” com­pe­ti­tion and cor­rup­tion.

It also cited un­spec­i­fied se­cu­rity risks for Chi­nese com­pa­nies in­vest­ing abroad, but did not give any fur­ther details about how it planned to strengthen rules or why it was con­cerned about cor­rup­tion and un­healthy com­pe­ti­tion be­tween com­pa­nies.

The UK gov­ern­ment ap­proved Chi­nese state-backed in­vest­ment in the con­struc­tion of the £18bn Hink­ley Point C nu­clear power plant in Septem­ber, af­ter Theresa May un­ex­pect­edly placed the con­tro­ver­sial scheme in Som­er­set un­der re­view, caus­ing ten­sions with Bei­jing.

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