Abacus | China returns to form – micromanaging overseas investments – but purchases rise, anyway
Remembering past excesses, Beijing takes a calculated risk that avoiding the dangers of a worldwide shopping spree is worth the risk of a backlash from international investors
Many observers predicted a backlash against last year’s rapid rise in China’s outbound investments. Few expected that backlash to come from Beijing itself. Nevertheless, that’s what happened. After China’s outward direct investment surged to US$170 billion last year, up 44 per cent from 2015’s record sum, the authorities slammed on the brakes.
In response, outward investment plunged to just US$10 billion in the first quarter of this year, from a high of almost US$50 billion in the second quarter of last year.
Lately there have been signs the clampdown is easing, and outward investment volumes are picking up again. Even so, the landscape has changed, and Chinese companies’ international deal-making is not going to regain the frenzied pace seen last year. Perversely, that may make the chances of an international backlash against China’s outward investments greater in the future.
Beijing lit the blue touchpaper on outbound investments back in 2014, when it scrapped requirements that the authorities should pre-approve each and every deal on a case-by-case basis. The move triggered a spate of outward acquisitions, many of them by privately held companies, which under the previous regime had been permanently relegated to the back of the approval queue behind state-owned enterprises.