Hong Kong Media: China’s overseas M&A will step into the “new norm”.
2016.11.25 Source: 转载 [ Print ] [ Close ]

According to South China Morning Post in Hong Kong, this year marks the one that Chinese enterprises really go global. During the first 9 months, the total overseas M&A amount announced by Chinese enterprises has exceeded over USD 170 billion, higher than that of any year. These M&As are not all welcomed with open arms. When a country rapidly becomes an important force in global M&A, these concerns are understandable. However the strong business reasons behind China’s overseas M&A actually have brought about huge opportunities to related companies and economies.

20 years ago, China’s overseas M&A was originally motivated from Beijing: Chinese government wanted its domestic enterprises go abroad to upgrade their global competitiveness. However, the M&A wave triggered during the past years is just the product of this extraordinary driving force.

Firstly, we will look at China’s economic scale. In 2015, China’s real GDP was 30 times of that of 1978. Such a growth was accompanied by the expansion of Chinese enterprises. Today, more and more Chinese companies have their scale, confidence and experience to launch and implement the large-scale M&A.

Secondly, China’s economic rebalancing influences its overseas investment. In the past, China’s economy was closed and dominated by the government, while focusing on heavy industry, architecture and export. Now, China’s economy is more driven by domestic demand. Nowadays, the activities of service industry account for over 50% of China’s GDP. Manufacturing industry has climbed up to the upstream of the value chain and become more advanced in terms of technology.

Such a transformation has changed the objects and subjects of Chinese enterprises M&A. 10 years ago, the overseas expansion of Chinese enterprises was mainly targeting at ensuring the supply of natural resources and energies. Today, there are more and more varieties of target industries. 10 years ago, overseas M&A was usually the competitive bidding of raw materials and assets by large-scale state-owned enterprises. Today, it might be some e-commerce companies in Singapore or certain film companies in Hollywood, pursued by certain private enterprises.

Finally, such a slower growth has stimulated the desire of Chinese enterprises to go abroad to seek growth and diversification.

Therefore, it is incorrect to worry that China is trying to exert adverse influence via oversea M&A or have the motion of transferring its assets to abroad. On the contrary, the sharp growth of China’s M&A activities is just the product of increasingly gradual matured economy and the simple reasons of enterprises. China’s M&A, just as its economy, is moving toward a “new norm”. (By Gordon French; Translated by: Chen Jun’an)