A Tuesday report by Linklaters LLP concluded that Chinese companies plan to spend US$1.5 trillion snapping up foreign companies and investing in manufacturing over the next decade – a 70 percent increase over the last 10 years, The planned expenditures, however, depend on whether or not the deals receive a nod from various government agencies.
Via the Financial Post:
Government policies encouraging Chinese companies to invest in manufacturing capabilities, particularly for advanced technology, and international trade will help maintain deal flow, the law firm, which specializes in advising on mergers and acquisitions, said in the report. Chinese buyers have spent about US$880 billion on assets in other countries in the last 10 years, according to the data.
The success of China’s bidders will depend on their ability to overcome foreign countries’ concerns about national security and interest, which contributed to the failure of as much as US$75 billion in announced outbound deals last year, Linklaters said in the report. China may also have to bow to international pressure to liberalize its markets, it said.
“While the pace of outbound deals has declined in 2017, China’s long-term aspirations” mean that overseas “investment and acquisitions from China will continue to be a significant force over the long term,” Linklaters said.
Not so fast…
Chinese businesses have been blocked from acquiring companies in industries critical to a country’s economy or national security, such as tech and infrastructure firms. German semiconductor manufacturer Axitron SE saw its planned sale to a Chinese company collapse last December following a protest from the Obama administration’s Committee on Foreign Investment. The same committee also terminated a Chinese deal to buy Royal Philips’ NV’s lighting unit, Lumileds.
Bank blocked?
Chinese aviation and shipping giant HNA Group Co. is one of the acquisitive companies under enhanced government scrutiny, while several major Chinese banks which helped fund their growth have stopped issuing new loans to the company, according to sources familiar with the matter.
That said, the Linklaters report closes by saying “Despite potentially increased scrutiny by Chinese regulators and banks of some of the deals underlying these flows, we expect China to remain ‘open for business’ with respect to genuine strategic overseas acquisitions. If such investments are blocked in some jurisdictions, this may redirect Chinese players’ interest towards other jurisdictions.”
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Makes sense to get rid of fiat, ex nihilo created confetti, and get something that cannot be ruined by the usual synagogue suspects. The peasants get au/ag/btc and large players get equities and r/e.