Chinese outbound investment rose in the first half of the year, but overseas M&A volume shrank, EY says

China’s outbound direct investment, rose 9.6 per cent from a year ago driven by the strong interest in non-financial sectors

EY report shows value of total overseas M&A deals dropped to a decade-low

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An Electric Multiple Unit high-speed train for a rail link project, which is part of China’s Belt and Road Initiative, arrives at Tanjung Priok port during load in Jakarta, Indonesia, September 2, 2022. Photo: Reuters

Published: 8:30am, 16 Aug 2023

Chinese outbound investments rose by nearly a tenth in the first half of the year, driven by an economic recovery, but aggregate overseas mergers and acquisitions (M&A) volumes fell to a decade-low dropping 14 per cent from a year ago, according to a report by global accounting firm Ernst & Young.

China’s outbound direct investment, or ODI, rose 9.6 per cent from a year ago to US$75.4 billion. It was mainly due to the strong growth of investment in non-financial sectors, which made up for more than 80 per cent of the volume. The non-financial ODI in Belt and Road countries contributed US$11.6 billion, growing by 15.4 per cent compared to the same period last year.

“The momentum for Chinese companies to go abroad has strengthened,” said Loletta Chow, Global Leader of EY China Overseas Investment Network. She added the expansion is “expected to accelerate”, as Beijing announced a series of initiatives to prop up the country’s private sector, and many expo events are lined up in the coming months.

The report also showed a decline in value of total overseas M&A deals announced. It dropped to US$11.7 billion, the lowest in a decade, with only Latin America and Oceania showing growth. Latin America was the top destination for M&A deals by region, ranking first for the first time in nearly a decade.

This handout picture released by the Brazilian Presidency shows Chinese President Xi Jinping (L) and Brazil’s President Luiz Inacio Lula da Silva attending a welcome ceremony at the Great Hall of the People in Beijing on April 14, 2023. Photo: AFP

“In recent years, China’s circle of friends in Latin America has been continuously expanding, with the Brazilian president’s visit to China, Honduras establishing diplomatic relations with China, and China and Argentina signing a cooperation plan under the BRI,” the report said.