China Makes It Official, Formalizes Overseas Acquisitions Restrictions

Xi Jinping
DENIS BALIBOUSE/POOL/EPA/REX/Shutterstock

So now it’s official: The brakes are on when it comes to Chinese investment in film, entertainment, sports and hotels.

In documents and statements issued Friday by the National Development and Reform Commission and by the State Council (document in Chinese), the Chinese government explained its crackdown on overseas mergers and acquisitions. In the past, it has characterized some deals in the entertainment sector as “irrational.”

Sometimes known as the state planning body, the NRDC listed three categories of overseas investment: those that are banned (sex and gambling industries, and core military technology); those that are restricted; and those that are to be encouraged. Property, film, entertainment, sports, hotels and obsolete equipment were named in the “restricted” category. That means any proposed deal will have to endure new levels of scrutiny.

Companies including Dalian Wanda and Fosun International have been involved in all of those categories. Wanda recently suffered further problems when the government ordered banks to cease lending to many of its foreign operations. The giant group, which was China’s biggest investor in Hollywood, responded by selling off $9 billion of leisure and hotel assets in China.

Falling into the “encouraged” category are those deals that support the Belt and Road Initiative, China’s massive overseas infrastructure and network building plan. The outreach scheme is frequently likened to a new Silk Road. Other investments that are encouraged are those that promote Chinese technical standards.

“Profound changes are taking place in international and domestic situations, and Chinese enterprises face not just relatively good opportunities but also various risks and challenges in overseas investments,” said the State Council, the Chinese government’s Cabinet.

The movement against overseas dealing began last year with the incremental introduction of capital outflow restrictions and greater deal scrutiny. While high-priced individual deals may have caught the eye of regulators, the process was likely sparked by macroeconomic concerns over debt and currency and attempts to rein in volatility and markets.

“Some companies focused on property rather than the real economy, which, instead of boosting the domestic economy, triggered capital outflows and shook financial security,” the State Council said.

Deal flow this year across many sectors has reduced considerably. But recent data point to overseas deals by private companies falling even more sharply while deals by state-owned enterprises are accelerating.

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  1. BD says:

    All the idiots that think they can deal with communists are fools. Wait till they call in the debt the USA owes them…

  2. Story says:

    Smart moves by government.

  3. beth says:

    OMG, with each passing day, President Trump looks smarter and smarter – from dealing with the communist Chinese to Islamic terrorist attacks…

    • See Me - Feel Me says:

      Sadly trump has a big mouth and fails to understand that threatening the world over twitter has consequences. He foolishly believes he’s some kind of a great businessman/negotiator but I have never seen any other CEO on the planet try to push their agenda over social media. If trump was an actual CEO of an actual corporation and he behaved the way he does, he would be fired in five minutes. He has no idea how China conducts business nor the ramifications of what threatening them will be. This hurts the US economy and he like the irresponsible little twit he is will try to blame Obama for it.

    • Pay Attention, you just might learn something says:

      This is the Chinese pulling investments in American companies, which hurts our economy and takes away our jobs. They’re doing this because Trump repeatedly said we are in a trade WAR with them ( which was just echoed by Rex Tillerson).

      This is not a win. This is not good diplomacy or good business. It is yet another failure by the Trump administration. Thanks for voting for this idiot, and have fun paying double for clothes next year once they kick us out of their factories.

      • Donna says:

        You are correct, it isn’t a win for Trump…but it does prove China is not a free economy and shouldn’t be treated as such. They disappear CEOs they don’t like, they tell companies what they can and can’t invest in using fear and repression. They have plans that have no benefit for the US.

        We should fear them. Not invite them to bed. They have been building their resources slowly, waiting til we are so enmeshed that the Western world is turned upside down and liberal democracies are a thing of the past. They did not meet their WTO obligation to become a free market economy and therefore shouldn’t have the rights and privileges of one. No country that controls every aspect of their companies’ behavior can compete fairly with those of us who don’t. They can underwrite all bad loans. They can undersell everyone by propping up companies that are broke. China does this every day. They print their currency and name it’s value and we all act like that is legit. It isn’t. And we can’t compete with it.

        They force our companies to give tech secrets if they want to do any business in China…often making demands after the company has invested millions in China already. Look at IPhone being forced to take VPNs off their app store in China. This is Bull pucky.

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