Chinese corporates plot major overseas push

Chinese corporations are planning to significantly ramp up their cross-border investments, according to research.

Almost two-thirds (63 percent) of mainland Chinese businesses plan to increase international investments by more than 10 percent over the next two years, with another 19 percent eyeing a 1 percent to 10 percent rise, according to The Age of Hypercomplexity: Asia Pacific Business and Legal Macrotrends from global law firm Baker McKenzie. Chinese businesses identified South-East Asia as their top area of focus, followed by South Asia and Europe.

The bullishness is despite reduced cross-border dealflow in recent years due to greater scrutiny by US, Australian and European governments into China-backed deals. Chinese activity dropped for the second consecutive year to $105.4 billion across 498 outbound deals in 2018, making it the fourth most-active cross-border investor behind the US, Japan and Canada, according to Dealogic.

But those who do spend are spending more. Six of the 10 largest outbound Chinese investments over the past decade were completed in 2017 or later, according to S&P Global Market Intelligence. China ChemChina’s $46 billion purchase of Swiss agrichemical business Syngenta in 2017 tops the list, followed by a $21 billion deal last year for Singaporean warehouse operator GLP by a Bank of China-led consortium.

South-East Asia was the most popular focus for all Asia-Pacific corporates, with 69 percent identifying it as a top priority for overseas investment, the Baker McKenzie report said. India and North America also scored highly.

Japanese corporates were most bullish on North America, with 21 percent identifying it as a top target. Japan, China and India were the keenest on Europe, though interest in the UK was negligible. None of the 200 corporate respondents in Hong Kong or mainland China or the 100 based in India listed the UK as a top focus.

Strategic buyers have been blamed for holding back private equity’s expansion into Asia.

“The most fundamental reason causing private equity to be a less important buyer is that in Asia you have dominant strategic buyer groups – the likes of keirutsu in Japan, chaebols in Korea, state-owned enterprises and tech giants Baidu, Alibaba, Tencent and JD.com in China, and family conglomerates in South-East Asia and India,” Olivia Ouyang, director of funds (Hong Kong) at Ontario Teachers’ Pension Plan said at a conference last year.

Baker McKenzie surveyed 600 C-suite and director-level executives across Hong Kong, mainland China, Japan, Australia, Malaysia, India and Singapore.