Government Clamps Down on Bogus Overseas Investments

China will crack down on bogus financings that masquerade as legitimate investments but are merely meant to transfer money or other assets overseas, an official from the foreign exchange bureau said Thursday.

As more Chinese firms seek business opportunities abroad or acquire overseas companies, the State Administration of Foreign Exchange (SAFE) wants to support the ones that do "real" investments rather than those simply move assets across the border, said SAFE official Guo Song at a news conference.

The examination of all overseas deals will be strengthened based on a regulation issued in 2008 that lists all illegal overseas transactions, said Zhang Shenghui, another SAFE official.

In 2015, China overtook Japan to become the second-largest country of outbound investment, with a total volume at a record $145.6 billion. Chinese companies made 579 mergers and acquisitions abroad, with a total transaction volume of $54.4 billion, according to a report co-compiled by the Ministry of Commerce, the National Bureau of Statistics and SAFE.

Nearly 80 percent of the investments, or $116.4 billion, flowed to tax havens such as Hong Kong, the Netherlands, the Cayman Islands, the British Virgin Islands and Bermuda, the report found.

In the first half of 2016, there were 107 such deals, 24 of which are individually worth more than $1 billion, according to a report by auditor PricewaterhouseCoopers. China National Chemical Corp. accounted for the most expensive acquisition among Chinese companies when it bought Swiss agrochemicals giant Syngenta AG for $43 billion.

Contact reporter Coco Feng (renkefeng@caixin.com); editor Ken Howe (kennethhowe@caixin.com)