Caixin
Oct 18, 2016 07:11 PM
M&A

Gap Between Outbound Direct Investment, Foreign Direct Investment Continues to Grow

(Beijing) — China's outbound direct investment continued to exceed foreign direct investment in September, widening a gap that first appeared in February to almost $40 billion, largely due to greater merger and acquisition (M&A) investments.

In the first nine months of the year, Chinese investors made a total of 882.8 billion yuan ($134.2 billion) worth of direct investments into 6,535 non-financial enterprises in 160 foreign countries and regions overseas, up 53.7% year on year, the ministry announced on Oct. 18.

In particular, Chinese enterprises conducted 521 overseas M&As in the nine months with a combined value of $67.4 billion, which already exceeded the amount for the whole year of 2015 at $54.4 billion, according to the ministry.

China Cinda Asset Management, for example, completed its acquisition of Nanyang Commercial Bank for $8.8 billion in May, setting a record for any Hong Kong bank acquisition. It was also the largest overseas M&A by a Chinese firm in the first half of the year.

According to the ministry, the amount of outbound direct investment in September was nearly 106.3 billion yuan, up 56.9% compared with the same month last year.

Meanwhile, the amount of foreign investments Chinese enterprises received in the first nine months increased by only 4.2%, reaching 609 billion yuan. In September alone, the amount of foreign direct investment was 60.2 billion yuan, up 1.2% year-on-year, the ministry's data show. The values do not include investments made in the banking, insurance and securities industries, according to the ministry.

China's outbound direct investment surpassed foreign direct investment this year for the first time since records began in late 2008, as Chinese companies conducted more mergers and acquisitions overseas.

The gap between accumulative outbound and inbound investments has widened from $7.4 billion in February to $39.1 billion in September, according to the ministry's data.

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Earlier this month, Dealogic, a London-based financial information and service provider, published data that put China's outbound foreign direct investment in the first nine months at $173.9 billion, compared with the official number that came out later.

Dealogic said the value of investment marked a 68% increase year-on-year, and pushed China past the United States as the world's biggest cross-border acquirer.

The estimate was based on a total of 601 M&A plans announced this year by Chinese companies as of September, according to Dealogic. In the first nine months of 2015, only 441 plans were announced.

The Chinese government's data on outbound direct investment involved only deals that had already been completed according to international standards, said Shen Danyang, a ministry spokesman.

Shen said some foreign research institutions had different estimates about China's outbound investment because they included in their calculations investment plans that were not final or had not received all regulatory approvals needed.

Contact reporter Wang Yuqian (yuqianwang@caixin.com); editor Ken Howe (kennethhowe@caixin.com)

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