China official warns over foreign takeovers as figures show outbound M&A levels have fallen this year

William Turvill
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China Daily Life
Chinese companies were particularly active on foreign takeovers last year (Source: Getty)

China’s foreign exchange regulator has issued a warning over foreign takeovers.

And Chinese companies appear to have slowed down their foreign takeover ambitions this year, following a bumper 2016.

New Dealogic figures show that there has been a fall in the number of outbound Chinese deals, from 162 at this point last year to 134 this year, and value, from $82bn (£66.3bn) to $25.5bn (£20.6bn).

Read more: Rocketing Chinese M&A at risk from new rules and global protectionism

“Overseas mergers and acquisitions can sometimes resemble a rose with thorns, you must be careful and you must do your due diligence,” Pan Gongsheng, head of the State Administration of Foreign Exchange, told the Shanghai Securities News.

“These deals can be like clasping a handful of sand at the beach, it looks like you’ve got it in your grasp but at the last moment it slips through your fingers.”

Read more: This isn’t an M&A bubble: It’s the start of an unprecedented boom

Specifically, he made reference to Chinese acquisition of football clubs. Last year, Premier League club West Bromwich Albion were bought, and Southampton is reported to be in talks with a Chinese investor this year.

“If these purchases help improve the standard of Chinese football, then I think that's a good thing,” Pan said. “But is that what's really happening? A lot of Chinese companies already have high levels of debt and then borrow another large sum to make overseas purchases. Others pretend to be investing but are actually just moving their assets.”

In late 2016, following the biggest year ever for outbound Chinese deals, it emerged that officials in the country wanted to impose new M&A rules.

They were said to be concerned about: acquisitions worth more than $10bn; deals worth $1bn or more in an area not core to the buyers; and state-owned enterprises investing more than $1bn on overseas real estate.

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