Despite Serious Growth, Chinese Outbound Investment is Eyed Warily

From the New York Times DealBook blog:

While the volume of mergers and acquisitions around the world was down 30 percent in the first half of the year compared with the same time in 2007, transaction volumes were actually up 5 percent in Asia, in large part because of aggressive buying by Chinese companies.

In the first half of 2008, Chinese companies announced plans to buy a combined $42 billion worth of foreign assets. That is a little more than five times the volume in the first half of 2007, according to data from Dealogic.

The author goes on to wonder,

So will this usher in an era of aggressive Chinese deal-making across the globe? That remains to be seen. So far, all but one of the 10 unsolicited and hostile deals launched by Chinese firms on foreign targets since 2005 focused on natural resources. The one exception was when Chinese insurer Ping An made a successful, unsolicited bid to take a 4.2 percent stake in the Belgian-Dutch financial-services group Fortis.

For now, it seems the Chinese are most determined to secure commodity assets. But that could quickly change.

The Economist also recently reported on Chinese outbound foreign direct investment, noting many Western firms’ wariness of Chinese investment:

Chinese firms are in an odd situation. Their increasing wealth means they can afford to make acquisitions. But they are increasingly regarded as unpalatable buyers. Since 2005, when CNOOC was blocked by the American government from acquiring Unocal, an American oil firm, many of China’s state-owned giants have been wary of bidding for Western firms. Instead, they have preferred to do deals in places like Africa, where asset sellers and the government work together (and often overlap), and high prices overcome objections, at least in the short term.


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