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China M&A conference highlights overseas investments linked to Belt and Road

Chinese companies likely to invest abroad despite government clampdown

Members of the China Mergers and Acquisitions Association take the stage at the annual M&A conference in Hong Kong on Aug. 11. (Photo by Jason Tan)

HONG KONG -- Despite efforts by Chinese authorities to rein in outbound investments by mainland companies, a major conference on mergers and acquisitions took place in Hong Kong on Friday, attracting several hundred participants.

Speakers from the finance, banking, investment and regulatory fields said there is no stopping Chinese companies from continuing their overseas buying spree.

The annual conference was sponsored by the China Mergers and Acquisitions Association, a non-profit, non-government entity approved by China's State Council and the Ministry of Civil Affairs. It was the second time the association has held the forum in Hong Kong since 2013.

Although Chinese firms should probably be more prudent in acquiring overseas assets to abide by the government's controls, they plan to beef up investments in markets targeted by the Chinese Belt and Road Initiative, the speakers said.

According to Ba Shusong, chief China economist at Hong Kong Exchanges & Clearing, China overtook the U.S. and Japan in 2014 to become the biggest investor in BRI-affiliated markets.

"We see more spending power coming from the Chinese private sector versus the state-owned enterprises as the former are gaining strength in capital and financing," Ba said.

He said the amount committed by Chinese companies in investing in these markets reached $71.4 billion in the first half of the year, up 39% from a year earlier.

"The short-term measures [imposed by the government] will not dent the Chinese M&A industry's growth going forward. This will stop their reckless buying moves over the last few years and instead prompt them to make more rational investment decisions," said Chen Shuang, chief executive of the cross-border asset management unit of state-owned financial conglomerate China Everbright Group.

In the first six months of 2017, Chinese M&A activities in overseas markets plunged by more than 50% to $65.7 billion from a year earlier, according to Mergermarket. In the first half of 2016, Chinese overseas acquisitions amounted to $92.2 billion, surpassing the U.S. for the first time.

Last November, China's currency regulator imposed stricter scrutiny of overseas payments exceeding $5 million, and banned deals of more than $1 billion that were deemed to be "outside the investor's core business".

This summer, five Chinese companies, including Dalian Wanda Group, Fosun, HNA and Anbang Insurance along with Zhejiang Luosen, an investment vehicle used by Chinese businessman Li Yonghong to acquire Italian soccer club AC Milan, were singled out for closer scrutiny by domestic banks under a directive issued by the banking regulator.

The China Mergers and Acquisitions Association was founded in September 2004 and is based in Beijing, with branches in Shanghai, Fujian, Guangdong, Hong Kong, Japan and the U.S. It provides investment banking services for governments and enterprises.

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