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China Overseas Investment Plunges 46%

By Chen Mengfan and Dong Tongjian

(Beijing) — China’s nonfinancial outbound direct investment (ODI) dropped significantly during the first half of this year as companies spent less on overseas mergers and acquisitions.

Chinese companies spent $48.2 billion as ODI from January through June, a decline of 45.8% from the same period in 2016, Commerce Ministry spokesman Gao Feng told a news conference Thursday.

Overseas deals involving property developers, hotels, entertainment and sport clubs shrank. Investment in foreign real-estate developers plummeted by 82.1% year-on-year, while that in the cultural, sport and entertainment industry fell by 82.5%, Gao said.

He added that the Ministry of Commerce and other regulatory authorities had stepped up efforts to curb “irrational” deals and diversify outbound investments since late last year.

Pan Gongsheng, the head of China’s State Administration of Foreign Exchange, said in March that some overseas investments were “irrational” and “abnormal,” such as a domestic steel maker’s acquisition of an overseas food company and a Chinese restaurant’s purchase of overseas internet gaming companies.

Pan said many Chinese companies borrowed heavily to fund their overseas shopping spree while piling debts at home, while some others transferred assets abroad under the “pretext” of investing abroad.

Gao added that China’s ODI fell also because the Chinese economy continues improving, and some foreign governments tightened control over inflows.

Contact reporter Dong Tongjian (tongjiandong@caixin.com)

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