What’s real and what’s not? China’s grip on overseas deals leaves everyone in the dark

On the day after former British prime minister Margaret Thatcher died, Jonathan Portes, a professor of economics and public policy at King’s College, said on BBC Radio 4: “In 1979, a quarter of a century ago, a politician came to power with a radical agenda of market-oriented reform – a plan to reduce state control and release the country’s pent-up economic dynamism. That changed the world, and we’re still feeling the impact. His name, of course, was Deng Xiaoping.”

China’s sheer size and the country’s migration from state planning to market economy made it a force for truly globalised investment and trade. Its interpretation of capitalism -- with Chinese characteristics -- has not only been unique, but sometimes risky for everyone involved.

Recent events show that as Beijing throttles back hard on financing acquisitions by Chinese conglomerates, it may be inducing a market crash.

The withdrawal of credit for overseas deals is only the beginning of the kind of credit tightening that inadvertently collapses balance sheets.

In 2016, overseas acquisitions reached a high of US$170 billion. Indeed, the situation has become so controversial that even Chinese technology tycoons are calling out suspected frauds.

LeEco “is obviously a Ponzi scheme,” said Zeng Liqing, co-founder of Tencent Holdings. “You don’t belong in the investment market or entrepreneurial world if you can’t see that.”