In 2017, the pendulum on Chinese outbound investment swung back. As so often before, a sudden dramatic increase was followed by a pullback, driven both by government intervention and also increased strategic prudence from investors.
Clear in the government’s intent was the desire to reduce risk and to reassert its influence over where and how Chinese companies invest internationally. Reducing foreign exchange outflows, reducing risk to China’s geopolitical reputation, reducing risk to Chinese financial institutions financing deals, and reducing risk to companies themselves that should have known better than to pursue such indiscriminate diversification were all part of the agenda. And certainly there was an impact with the headline value of deals down around 30 percent.
Yet beneath the headlines, China outbound investment remained robust and in some ways healthier than in 2016. Strip out the mega deals in 2016, such as ChemChina acquiring Syngenta, and the value of transactions in 2017 fell much more modestly, perhaps less than 10 percent. The volume of deals actually rose, more investments were made into early stage companies to access IP, a higher proportion of investments were clearly linked to the core strategy of the Chinese acquirer, and more organic investments were made to bolster prior year acquisitions.