China is hungry for investing abroad
On the bright side, China's appetite for investing abroad remains strong. Under the weak global economy, foreign investors are making fewer M&A deals in China, but China continues to remain hungry to invest in companies abroad.
In the first half of this year, M&A deal numbers in China dropped by 33 percent, compared to the same period a year ago, according to a report PricewaterhouseCoopers (PwC) issued Wednesday (August 14th). In contrast, China’s outbound investment deals tripled in value, the report said.
Until several years ago, Chinese companies rarely showed up on the active M&A scene abroad.
The Chinese today, however, are increasingly comfortable with acquiring resources, energy and technology-related business abroad. In the first half of 2012, Chinese companies announced nine deals -- including seven in the resources and energy sector -- with a value exceeding $1 billion, compared with only two during the period last year.
While the Chinese remain eager to invest abroad, the PwC report, too, pointed out a trend of declining FDI in China. The report found a 42 percent drop in inbound deals into China by foreign buyers in the first half of this year, from the same period of last year.
Similarly private equity deals with a value of $10 million or more also dropped sharply, down 39 percent, according to PwC. This could be partly explained because deals processing times were intentionally lengthened in anticipation of a further decline in prices, noted PwC.
China’s commerce ministry spokesman Shen, however, insisted the full year's FDI in China would "stabilize," as economic growth picks up in the second half.
As to why China’s attractiveness will be strong in the long term, Shen cited “1) huge domestic consumption; 2) China's efforts to crack down on the infringement of intellectual property rights; and 3) the accelerating process of industrialization.”
Many in the West might agree on the first and third points, but on No. 2, not so much, not yet, not ‘til China puts its money where its mouth is.
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