Nations participating in Xi Jinping’s much-vaunted Belt and Road initiative have seen a surge in Chinese mergers and acquisitions despite efforts by Beijing to stifle capital outflows.
Data from Thomson Reuters indicates that China’s acquisitions in the 68 countries that are official participants on One Belt One Road have already reached the USD$33 billion threshold, well ahead of the total of $31 billion for all of 2016.
The biggest Belt and Road acquisition thus far this year has been the $11.6 billion takeover of Singapore’s Global Logistic Properties by a Chinese consortium.
Other key deals include China National Petroleum Corp’s $1.8 billion acquisition of an 8% equity stake in an Abu Dhabi oil company, and HNA Group’s ongoing $1 billion acquisition of Singapore’s CWT Ltd.
This rise in One Belt One Road acquisitions comes despite heavy curbs on capital outflows launched by Beijing towards the end of last year, in order to shore up the yuan and maintain financial stability.
This led to a year-on-year drop in non-financial outbound investment of over 45% for the first half of 2017, following a record-breaking $220 billion in overseas acquisitions by Chinese companies in 2016.
Regulators have since cracked down on the profligate overseas buying spree of Chinese corporations such as Dalian Wanda and HNA Group, due to concerns over “irrational foreign investment” and the trouble this could cause China’s financial system given the heavy extent to which such acquisitions are debt-fuelled.
These efforts have intensified since the start of the second half, with Beijing ordering banks to assess their exposure to these overseas acquisitions, while also stepping up its own reviews and accountability measures of foreign investment by major corporations.
Measures by regulators to contain capital outflows and overseas investment appear to be focused only on certain areas, however, with the China Banking Association previously signalling that there would be no curbs on investment in One Belt One Road projects.
China’s State Administration of Foreign Exchange also indicated earlier this month that Chinese companies are actively encouraged to take part in Belt and Road business.
One source told Reuters that while it now takes as long as six months for outbound investment to garner approval from Chinese regulators, for Belt and Road projects official clearance only takes between three to four months.
This has prompted investors to emphasise the fact that their projects are involved with One Belt, One Road, and make it “the first sentence in the document” according to another source.
According to Hilary Lau, partner at law firm Herbert Smith Freehills, the “acquisitions are…policy-driven.
“There are funds allocated by Chinese banks and state funds for Belt and Road deals,” he said. “People are thinking in a long-term approach when making investments along Belt and road countries.”
Key hotspots for Chinese outbound One Belt One Road investment include Indonesia, Malaysia and Myanmar amongst ASEAN nations, as well as Bangladesh, India and Sri Lanka in South Asia.