Ambivalent state policy hampers Chinese outbound M&A

Author: Brian Yap | Published: 26 Oct 2016

The Chinese government has mixed feelings about Chinese companies acquiring foreign assets, according to an October 19 media roundtable on Chinese outbound real estate investment run by Paul Hastings in Hong Kong.  

Indeed, China outbound investment may have set new records this year with $17 billion spent during the first five months of the year, but the government’s inconsistent policy towards promoting Chinese outbound acquisitions could have stemmed the rapid outflow of capital.  

Speaking at the roundtable,  Paul Guan, partner at Paul Hastings in Hong Kong, said that Chinese authorities have been stuck in a dilemma between encouraging large insurance companies and state-owned enterprises (SOEs) to invest abroad, and preventing an excessive outflow of capital.  

With the continued depreciation of the Chinese currency in the past year, many large enterprises’ outbound acquisitions have contributed to a reduction in the country’s foreign exchange reserves. This has largely been due...