M&A deals in Belt & Road economies increase by 81%

China's overseas mergers and acquisitions in economies related to the Belt and Road Initiative achieved a record high of $48.2 billion in 2017, up 81 percent year-on-year.[Photo/VCG]

China's overseas mergers and acquisitions in economies related to the Belt and Road Initiative achieved a record high of $48.2 billion in 2017, up 81 percent year-on-year, according to an EY report issued on Wednesday.

Investments in B&R economies increased despite an overall drop in Chinese outbound direct investment last year by 32 percent from the previous year, in the context of the complex global investment environment and tightened domestic regulation on cross-border investment.

Last year, Chinese companies made nonfinancial outbound direct investment of $14.4 billion in 59 economies related to the Belt and Road Initiative, accounting for 12 percent of total nonfinancial ODI, according to the report.

EY, a global accounting and consulting firm, noted that the Association of Southeast Asian Nations, as a regional hub of the Belt and Road Initiative, is critical for the connectivity between China and other countries and regions along the routes of the initiative.

"Besides its critical geographical position, ASEAN is attracting more attention from investors with its young population, ample labor force, abundant natural resources and huge opportunities to invest in its infrastructure sector," said Andrew Choy, EY's China international tax services leader.

Last year, the deal value of Chinese M&A in ASEAN surged to $34.1 billion, rising by 268 percent year-on-year and representing 77 percent of the total value of Chinese M&A in Asia.

"ASEAN is becoming a key investment destination in Asia for Chinese companies with its geographic advantage as a trade hub under the Belt and Road Initiative, along with the investment opportunities in the infrastructure, technology, energy and mining sectors, ample human resources and vast market potential," the EY report said.

By deal volume, the technology, media and telecom sector took the lead with 148 deals last year, followed by diversified industrial products with 108 deals. Life sciences exceeded consumer products to rank third with 78 deals, up 26 percent year-on-year.

Boosted by thriving domestic demand and national strategies, Chinese overseas M&A deals in the life sciences sector have maintained an annual growth of more than 40 percent during the past three years. In 2017, disclosed value of Chinese overseas M&A in this sector increased 61 percent year-on-year to $9.9 billion.

EY expects Chinese overseas investment in the life sciences sector to continue rapid growth, while innovative technologies and products and life sciences companies in economies along the routes of the initiative will still be Chinese investors' targets.