Investors view stock prices displayed on computers at a securities company, June 25, 2007, in Chongqing Municipality, China. (Photo : Getty Images)
Overseas mergers and acquisitions by Chinese businesses slipped in the first quarter of this year as government regulators stepped in to stem the reckless growth in the sector, according to a report released by international accounting and auditing firm PricewaterhouseCoopers (PwC) last Thursday.
Chinese companies reported 142 mergers and acquisitions (M&A) overseas in Q1 of 2017, with a combined value of $21.2 billion. The volume and value fell by 39 percent and 77 percent, respectively, compared to the record highs over the same period last year, the report said.
China's outbound M&As shot up to 246 percent by value to $221 billion in 2016, more than the previous four years combined, according to the state-owned Xinhua News Agency.
Chen Chao, director of PwC China transaction services, attributed the slowdown to tighter regulations on Chinese investors and rising uncertainties worldwide.
"Since the fourth quarter of 2016, the regulatory authorities have pushed ahead with tougher requirements relating to authenticity and compliance of overseas investments by Chinese enterprises," Chen said. "In the meantime, the global political and economic landscape has been undergoing a new round of rebalancing, with increasing external uncertainties."
The report also noted that listed companies have been the main driving force in outbound M&As because of their robust funding and secure financing sources.
"After the blistering growth in 2016, there will be an obvious decrease in overseas acquisition deals this year and the recovery will come in 2018," said Wang Peng, PwC China tax partner.
The report showed that Europe and the United States remain the key destinations for overseas acquisitions by Chinese firms.
In 2016 and the first quarter of 2017, nearly 60 percent of deals secured by China-based companies were in the European and U.S. markets, according to the report.
In the first quarter of 2017, 32 percent of the total overseas M&As were in Asia, boosted by the Belt and Road Initiative.
"Cross-border M&As with strategic significance, especially industrial upgrading and the Belt and Road-related projects, will dominate the overseas M&A market in 2017," Chen said.
