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Belt and Road M&As surge

August 17, 2017

HONG KONG: Mergers and acquisitions by Chinese companies in countries that are part of the Belt and Road initiative are soaring, even as Beijing cracks down on China’s acquisitive conglomerates to restrict capital outflows.

Chinese acquisitions in the 68 countries officially linked to President Xi Jinping’s signature foreign policy totalled $33 billion as of Monday, surpassing the $31bn tally for all of 2016, according to Thomson Reuters data.

Unveiled in 2013, the Belt and Road project is aimed at building a modern-day “Silk Road,” connecting China by land and sea to Southeast Asia, Pakistan and Central Asia, and beyond to the Middle East, Europe and Africa.

At a summit in May, Xi pledged $124bn for the plan, but it has faced suspicion in Western capitals that it is intended more to assert Chinese influence than Beijing’s professed desire to spread prosperity.

The surge in Chinese companies’ acquisition-linked investments in the Belt and Road corridor comes as the volume of all outbound mergers and acquisitions from China has dropped 42 per cent year-on-year as of Monday, the Thomson Reuters data showed.

Beijing’s move to prop up the yuan by restricting the flow of capital outside the country and clamp down on debt-fuelled acquisitions to ensure financial stability has made it tougher for buyers to win approvals for deals abroad.

Regulators have tightened the screws further since June, reviewing deal agreements in minute detail and ordering a group of lenders to assess their exposure to offshore acquisitions by several big companies that have been on overseas buying sprees, including HNA Group, Dalian Wanda Group and Fosun Group.

The heightened regulatory scrutiny of overseas acquisitions comes after companies spent a record $220bn in 2016 on assets overseas, buying up everything from movie studios to European football clubs.

Published in Dawn, August 17th, 2017