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2015 latest updates

22 Oct, 2015 - China-UK bilateral investment shows constant growth momentum

China-UK bilateral investment shows constant growth momentum
22 October 2015

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29 Apr, 2015 - Outbound M&A deals reach historic high

China Daily
Outbound M&A deals reach historic high
29 April 2015

Outbound M&A deals reach historic high

The volume and value of Chinese outbound M&A deals reached a historic high in the first quarter of the year, according to a report from PricewaterhouseCoopers, while the "Belt and Road Initiative" is likely to bring new merger and acquisition opportunities for enterprises in years to come.

The study said 77 Chinese mainland outbound deals were signed in the first three months, worth $20.2 billion.

"Easy monetary policies, low interest rates and a significant surge in the Chinese stock market also helped drive deals," said Guo Wei, PwC's China transaction service partner.

The report said Asia was the third most popular destination for Chinese mainland outbound deals in the period, just behind Europe and the US.

"This reflects the strategy by Chinese companies to transfer their manufacturing bases and develop in other emerging markets," said Kevin Wang, PwC China's tax partner.

"The 'Belt and Road Initiative', Silk Road Fund and Asian Infrastructure Investment Bank will significantly boost Chinese investments and acquisitions in countries along the trade routes, especially in Southeast Asia." The Chinese government has raised the initiative to the national development strategy level, the report said, which will drive the outbound acquisition and investment activities of domestic enterprises.

It said the investment preference has been shifted toward developing countries in Central Asia, East Europe, Southeast Asia and North Africa away from developed countries.

Specific target industries have also changed, meanwhile, to infrastructure from traditional sectors such as mining and manufacturing.

Strong investment is also likely to be made in high-speed rail, electricity, telecom, engineering machinery, auto and aircraft manufacture.

"The Silk Road Fund, Asian Infrastructure Investment Bank and the BRICS Development Bank, all led by China, will facilitate financing methods for enterprises to make foreign investment," said Wang.

"The globalization of the renminbi will also offer further financing options for future overseas M&A projects." The report said private enterprises have continued to be the main driving force behind China's overseas M&A transactions, making 52 deals in the first quarter of 2015, against 16 by State-owned enterprises.

However, outbound deal activity by SOEs maintained steady growth in 2014.

"The 'Belt and Road Initiative' will create a new model. State-owned enterprises will lead infrastructure projects, and private enterprises will be a creator of manufacturing projects, which means SOEs will lay the foundations for private enterprise," said the report.

According to Wang, tackling what the report described as often complex and incomplete tax regimes is likely to be the major challenge ahead for Chinese enterprises in landing foreign investments.

He said before embarking on any overseas M&A transaction, a company should carry out thorough due diligence to assess the tax risks and figure out possible alternatives to the project.

28 Oct, 2014 - Deal activity gets private push

China Daily
Deal activity gets private push
28 October 2014

Private enterprises were the driving force of China's outbound mergers and acquisitions this year and will provide the momentum for sustained growth next year, a study said on Monday.

The study, conducted by global consulting firm PricewaterhouseCoopers, said private firms accounted for 120 of the 176 outbound M&A deals made by Chinese companies during the first three quarters of the year, accounting for deals of about $17.7 billion, up 120 percent over the corresponding period in 2013.

"The highlight of the global M&A market this year has been the growing number of M&A deals triggered by companies from the mainland. We expect the growth momentum provided by the these companies to continue into the next year," said George Lu, partner for China transaction services at PwC.

"Private enterprises and the more marketized State enterprises will dominate outbound deals in 2015 also, and the range of investments will become more diversified," Lu said.

The outbound M&A deal value of private firms increased in almost all sectors (except consumer), with high technology, telecommunications and retail seeing the maximum growth, he said.

The report said private enterprises are actively seeking quality M&A targets in North America and Europe, to introduce more advanced technology and strong brands to China. They are also shifting their manufacturing bases from China to other countries in Asia and developing emerging markets.

Only 56 outbound M&A deals were made by State-owned enterprises during the first three quarters. That marked a 37 percent year-on-year drop, the first of its kind, aided largely by the increased focus on SOE-reforms by less marketized State enterprises in the financial and energy sectors, said the report.

The report added that the more marketized State enterprises, on the other hand, have been very active in non-resources deals focused on more diversified sectors.

The report also showed that Chinese enterprises completed 43 M&A deals in other Asian countries during the first three quarters, indicating that Asia was close behind North America and Europe in terms of deal volume.

"North America and Europe will continue to be important destinations for Chinese companies in the coming years, while emerging markets, including Asia, Africa, South America and Eastern Europe, will see renewed Chinese M&A activity," said Lu.

According to the report, listed enterprises were the main source for mainland outbound M&A activity, with their deal volumes accounting for 56 percent of the total number, 77 percent of which were listed in Hong Kong and Shanghai.

Kevin Wang, a China tax partner at PwC, said: "Obtaining cost-efficient financing for outbound investment continues to be one of the major obstacles for outbound investment. Listed companies have more diversified financing channels, especially with the Hong Kong stock market adopting more transparent and efficient financing methods." According to Wang, private equity funds have shown an increasing interest in outbound deals and supported listed corporate buyers' outbound acquisitions with capital, knowledge and experience.