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Asia Connect / Treasury & Capital Markets
Chinese M&A in Belt Road countries surges 81%
On the back of the Belt Road initiative, Chinese M&A in Asean countries surges 268%, with Singapore overtaking the US as China’s most popular M&A destination in 2017
Janette Chen 18 Apr 2018

CHINESE merger and acquisition (M&A) deal value in economies along the Belt Road achieved a record high total of US$48.2 billion in 2017, up 81% year-on-year, according to a recent report from Ernst & Young (EY).

Hand-in-hand with the increase in total Belt Road M&A deal value, Asean (Association of South East Asian Nations) countries have drawn the attention of Chinese enterprises. The deal value of Chinese M&A in Asean surged to US$34.1 billion in 2017, rising 268% and taking a quarter of the total value of disclosed Chinese M&A.

This is despite the fact that Chinese authorities tightened regulations on cross border investment and capital flow in 2017, resulting in a decline in total overseas M&A activity, falling 32% year-on-year to US$144.8 billion. The number of deals also declined 12% to 620, according to the report.

The figures are demonstrative of China’s efforts to redirect outbound capital to projects along the Belt Road and in industries such as logistics, energy and transportation, rather than entertainment, hotels, and other so-called “irrational” investments, as described by the Chinese authorities. In terms of deal value, automotive and transportation posed a strong year-on-year growth of 501% in 2017, reaching US$45.1 billion in 2017, according to the report.

Chinese enterprises operating in logistics, warehousing and port industries were particularly active in Belt Road economies, according the report, especially in the logistics and transportation markets in Singapore, Myanmar and Malaysia.

“Besides its critical geographical position, Asean is attracting more attention from investors with its young population, ample labour force, abundant natural resources and huge opportunities to invest in its infrastructure sector,” says Andrew Choy, EY’s China international tax services leader.

Chinese property giant, Vanke, led a consortium to acquire Singapore-listed Global Logistics Properties (GLP) in July last year, marking the largest Chinese overseas M&A deal in Asean in 2017. The consortium, comprising Hopu Investment Management, Hillhouse Capital, Bank of China Group Investment and GLP’s chief executive Ming Mei, acquired GLP for US$11.6 billion, making Vanke the world’s largest logistics property owner.

“China and Asean are expected to further improve their relationship and expand broader cooperation under the Belt Road initiative,” says Loletta Chow, global China overseas investment network leader at EY. “Benefiting from ample human resources and extensive opportunities in infrastructure and other sectors, Asean is drawing increasing attention from investors,” she adds.

China's overseas M&A in the first quarter of this year recorded a year-on-year decrease of 36.1%, according to Thomson Reuters. However, Chow is positive on the outlook of Chinese overseas M&A. “We believe that China will take a firmer step towards going out, while Chinese companies are expected to raise their competitiveness and influence in the era of globalization,” she says.

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