Recent activities by Chinese companies to merge and acquire overseas once again became the focus of attention from foreign media as China’s “go global” efforts witnessed many mergers and acquisitions around the world amid a time that could have been bleak for such activities.
Some foreign media expressed shock at Chinese companies’ “appetite” for mergers and acquisitions. But as a matter of fact, such dynamic is normal and in line with China’s economic development and globalization.
In addition, all countries should reduce limits on foreign mergers and acquisitions to promote international investment cooperation.
Increasing Chinese mergers and acquisitions
Data from Dealogic, a financial service company, showed that trade volume of Chinese companies’ overseas mergers and acquisitions reached $110.8 billion so far this year, and China could take over the United States in overseas mergers and acquisitions by the end of 2016, according to foreign media.
“The reason for foreign media’s attention on Chinese companies’ mergers and acquisitions lies in two aspects. On the one hand, such activities indeed keep growing and shares are increasing. On the other hand, Chinese companies’ ‘going global’ exerts relatively huge international impact as Chinese investment provided economic backup for some countries in urgent need of capital,” said He Weida, a professor from the University of Science and Technology Beijing.
Despite mass coverage of the power of Chinese capital, it should be clear that there remain big differences in data of merger and acquisition volume.
Data from the Ministry of Commerce indicates that trade volume of Chinese companies’ overseas mergers and acquisitions in the first quarter of 2016 and the whole year of 2015 amounted to $16.56 billion and $40.1 billion, respectively.
Such a huge discrepancy with data from foreign media is due to differences in data analysis, because some foreign media included mergers and acquisitions in negotiations or even incorrect information in the data, according to Shen Danyang, a spokesman from the Ministry of Commerce.
Far cry from ‘escaping China’
Indeed, Chinese companies’ overseas mergers and acquisitions are growing. But such “going global” development does not represent “escaping China” as some fear.
From the perspective of the development of an open economy, China has entered the age of “bringing in” and “going global”. In the future, its overseas investments will surpass inbound foreign investment, according to Wang Xiaohong, an expert from the China Center for International Economic Exchanges.
In addition to increased volume, Chinese companies’ mergers and acquisitions changed their focus, from energy and chemical engineering to emerging sectors such as the Internet, information technology, and biological medicine, cultural industry, advanced manufacturing industry, and sports.
Fewer limits to promote cooperation
Fewer thresholds will provide more opportunities for Chinese companies to “go global”.
In recent days, the National Development and Reform Commission amended its management method regarding overseas investments in order to simplify the approval process for Chinese companies’ mergers and acquisitions.
Despite relaxed access domestically to overseas mergers and acquisitions, Chinese companies still face difficulties in going global, as some countries impose strict reviews on Chinese companies’ merger and acquisition activities.
According to Dealogic, 15 trades amounting to $24 billion have been rejected so far in 2016, due to strict censorship on Chinese mergers and acquisitions.
National strategic assets and national security should not always be cited to stop normal mergers and acquisitions, and fewer unnecessary limits will strengthen investment cooperation among companies from both sides, said He.