In 2016, Chinese entities made 932 deals worth over USD 220 billion, representing an increase of 246 percent over the previous year. The massive rise in deal value mirrored the shifting direction of Chinese economic growth, toward a model driven by technological innovation, consumption and industrial knowledge. It was also at least partly driven by a need for Chinese firms to diversify their portfolios and ward against currency risk.
Chinese investment in technology, media and telecommunications has risen steadily since 2014, as Chinese entities seek to move up the value chain and establish a global presence. A prime example is the USD 5 billion bid launched by home appliance maker Midea to take over Kuka, a German robot manufacturer. Midea is reportedly also eyeing a potential takeover of Clivet, an Italian air conditioning equipment manufacturer.
Any deals made in 2017 will be placed under greater government scrutiny than in previous years, with Chinese authorities introducing new regulations to stem capital flight. Although the volume and frequency of deals made by Chinese entities may decrease in response to these new rules, Chinese overseas investment shows no signs of stopping.
According to the national news agency Xinhua, “The government will closely watch companies that invest big sums in overseas real estate, hotel, entertainment and sports club… but the guidance on encouraging companies to move up the industrial value chain remains unchanged.”
Li Haitao, a Professor of Finance at CKGSB, believes that for “Chinese enterprises, going global will still be an inevitable choice if they are to expand take pre-emptive chances and gain strong pricing power worldwide in the future.” He predicts that the trend of Chinese overseas investment will continue, saying “The high-tech industry will be a focus and, driven by new middle class demand, there will be more big M&A cases in the premium consumption, medical and entertainment industries.”
Additionally, Dr. Li believes private companies will become major players in Chinese outbound investment. “Private enterprises focus more on efficiency which helps them avoid a blind pursuit of scale. They care more about profitability and future collaboration.”
On 30th August 2017, Naseba will be hosting a tech investor meeting in Shanghai, China. At the meeting, pre-screened Chinese investors will be introduced to pre-qualified technology investment opportunities.
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