In 2016 alone, Chinese firms bought an array of US companies, technology, and property estimated to be worth around $45.6 billion. (Photo : Getty Images)
Big Chinese companies are on a billion-dollar U.S. buying spree, but avoids Hollywood altogether in order to prove regulators that money is not being transferred to safer assets abroad, CNBC reported.
In 2016 alone, Chinese firms bought an array of U.S. companies, technology, and property estimated to be worth around $45.6 billion, according to Rhodium Group, an economic analysis firm.
Chinese regulators, however, are on the lookout for individual Chinese firms that are planning on sneaking money out of the country.
“The government approves deals that are core to the business of the Chinese firm--to make sure they are not disguising capital flight as a legitimate [acquisition],” Evan Medeiros, managing director and Asia practice head at Eurasia Group, told CNBC.
“They are not targeting entertainment companies per se.”
It’s in stark contrast to the recent months and years when Chinese firms signed partnerships and deals with American production companies. Just last week, talks between Chinese companies and MGM dissipated into thin air, The Wall Street Journal reported.
In addition, Dalian Wanda, a Chinese real estate conglomerate, did not push through with its plans to purchase Dick Clark Productions for $1 billion due to capital controls.
According to CNBC, the Chinese government is worried that “soft” acquisitions can make the yuan weak, as assets leaving China are converted into U.S. dollars. With a weakened yuan, more Chinese will transfer their assets out of the country.
As a means to prevent the yuan from weakening, the Chinese government has already imposed tighter regulators, which have since taken effect. In the past two months, the new controls have reduced the flow of Chinese money out of the country, according to Exante Data.
To compensate, Chinese companies are funneling their money into “hard” acquisitions.
“While the Hollywood/entertainment assets get a bunch of publicity, the hard industrial sectors have been getting lots of action,” David Pratt, managing director of MCAM-International, told CNBC.
“We see transactions in biopharma, materials science, agribusiness, and electronics, to name a few.”
