Chinese outbound M&A can keep defying gravity. This year has begun with a $10-billion splurge on mergers and acquisitions spanning everything from Hollywood's Legendary Entertainment to gay-dating app Grindr. That contrasts sharply with the loss of confidence in China that has hit stocks and currencies worldwide. However, local firms remain well-funded and keen to diversify. Absent a real financial crisis, or a state veto, deals will continue.
One simple explanation for the mismatch is that M&A takes months or years, while financial markets move much faster. China's Haier had coveted GE's appliances business for years before securing it for $5.4 billion last week.
But this also reflects the growing scale and confidence of Chinese companies. Ren Jianxin at ChemChina has already struck two deals this year, and is reportedly ready to pay $44 billion for Syngenta. He and other ambitious bosses like Haier's Zhang Ruimin or Legendary's new owner, Wang Jianlin of Dalian Wanda, nowadays lead huge groups. They have cash to play with, plus cheap debt on tap from Chinese banks.
They will not be dissuaded by cautious boards, nor by swings in China's hyperactive, retail-driven stock market. Wang's recent deals, for example, are long-term bets on China's growing taste for movies and triathlons.
A third, less benign, force is probably at work too: fear of what happens next in China. Buying assets overseas is a good way to cut your overall exposure to slowing growth. And if the yuan has further to fall, exchanging it for foreign assets now makes sense.
So the outbound push will probably continue. Chinese firms still covet foreign brands and knowhow - and the global sell-off creates bargains.
There are limits, however. Stricter capital controls to safeguard the yuan could stop any deals that rely on onshore funding. Or the government could simply order companies - even private ones - to pull back if it felt they were out of control, or too much capital was departing. And of course, a genuine financial crisis in China would kill bank lending, and force bosses to refocus on their core businesses. For now, though, gravity can be beaten.
One simple explanation for the mismatch is that M&A takes months or years, while financial markets move much faster. China's Haier had coveted GE's appliances business for years before securing it for $5.4 billion last week.
But this also reflects the growing scale and confidence of Chinese companies. Ren Jianxin at ChemChina has already struck two deals this year, and is reportedly ready to pay $44 billion for Syngenta. He and other ambitious bosses like Haier's Zhang Ruimin or Legendary's new owner, Wang Jianlin of Dalian Wanda, nowadays lead huge groups. They have cash to play with, plus cheap debt on tap from Chinese banks.
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A third, less benign, force is probably at work too: fear of what happens next in China. Buying assets overseas is a good way to cut your overall exposure to slowing growth. And if the yuan has further to fall, exchanging it for foreign assets now makes sense.
So the outbound push will probably continue. Chinese firms still covet foreign brands and knowhow - and the global sell-off creates bargains.
There are limits, however. Stricter capital controls to safeguard the yuan could stop any deals that rely on onshore funding. Or the government could simply order companies - even private ones - to pull back if it felt they were out of control, or too much capital was departing. And of course, a genuine financial crisis in China would kill bank lending, and force bosses to refocus on their core businesses. For now, though, gravity can be beaten.