Torrent of outbound FDI poses challenges as well as opportunities
Hong Kong firms need to carefully examine potential mainland partners before agreeing to partner with them in bids for foreign enterprises
More and more Hong Kong investors and business executives have engaged in strategic alliances, and even partnerships, with mainland companies in foreign investments. Understanding the backdrop to and challenges posed by the dramatic surge in mainland foreign direct investment (FDI) is crucial for Hong Kong companies when making strategic decisions and managing risks.
Mainland FDI continued to show tremendous growth in 2016. By the end of August, China had already made 173 deals worth US$128.7 billion, making it the top acquirer of foreign companies.
Many of the transactions were gigantic. ChemChina acquired the Swiss pesticide and seed producer Syngenta for US$43 billion – the largest cross-border acquisition by a Chinese company to date. Tencent bought Finnish mobile game developer Supercell for US$8.6 billion. Haier Group paid US$5.4 billion for General Electric’s home appliance division. Even the Chicago Stock Exchange was being sold to a Chinese investor group.
The strong growth of mainland outbound FDI has, in fact, been extending for over a decade. From 2002 to 2015, mainland FDI dramatically increased from US$27 billion to US$1,456.7 billion. Meanwhile, China’s global ranking in outbound FDI has risen from the 25th to eighth , accounting for 4.4 per cent of FDI worldwide.