M&As by China in countries part of BRI soar, despite capital crack down

The Dollar Business Bureau

Mergers and acquisitions (M&As) by Chinese firms in nations which are part of the Belt and Road Initiative (BRI) are rising, even as the Government cracks down on acquisitive conglomerates of China to limit capital outflows.

The acquisitions by Chinese firms in 68 countries that are officially linked to the foreign policy of President Xi Jinping totaled around $33 billion till August 14, exceeding the $31 billion total count for the entire 2016, as per the data by Reuters.

The BRI project, unveiled in 2013, is aimed at creating a modern-day ‘Silk Road’, which connect China by sea and land to Pakistan, Southeast Asia and Central Asia, and further to the Europe, Africa and Middle East. President Xi has pledged around $124 billion for the initiative in May.

The increase in acquisition-linked investment by Chinese companies in the Belt and Road region comes as the size of all outbound M&As from the country has declined 42% year-on-year till August 14, the data showed.

With China’s move to strengthen the currency - Yuan by limiting the capital flow outside the country and to put a stop on the debt-fuelled acquisitions for ensuring financial stability, it has become tough for the buyers to get approvals for outside deals.

The stricter regulatory scrutiny of acquisitions abroad comes after the Chinese firms spent a whopping $220 billion last year, buying up overseas everything from football clubs to movie studios.

However, the strict regulatory scrutiny has not affected the pursuit of Chinese companies for acquisitions along the BRI corridor, as these investments are considered as strategic for both the companies and the economy.

The number of deals by Chinese companies targeting the Belt and Road countries are 109 so far this year, as against 175 in the entire 2016 and 134 in 2015, according to the data given by Reuters.

The biggest deal so far this year in a Belt and Road country was the $11.6 billion buyout by a Chinese consortium of the Global Logistics Properties of Singapore.