Trying to stem the flood of capital leaving China for investments overseas, the government issues broad guidelines
Chinese government restrictions on the outflow of investment money to enterprises overseas took a more serious turn Friday when the government issued rules on acquisitions abroad for the first time, possibly signalling a further slowing of the flood of money headed overseas.
The Reuters news agency reports that the rules specify restrictions on risk-potential investments in property, hotels, entertainment, sports clubs and film industries, along with investments in the gambling and sex sectors.
Exports of core defence technologies are also to be banned as issues of national interest and security.
The gambling restriction could impact growing Chinese business interest in overseas casino projects that attract Chinese punters with action that they are denied by restrictions at home.
What started as a government initiative to crack down on “irrational” overseas investment last year has now evolved into a more formal, tighter government effort to control capital outflows. This has added another layer of uncertainty and complexity to Chinese business deals, according to one analyst.
Cross-border business activity among Chinese companies has reportedly dropped in the first half of 2017, and Thomson Reuters data released this week showed that all outbound mergers and acquisitions from China dropped 42 percent year-on-year as of August 14.
Chinese companies have in the past acquired everything from property and movie studios to football teams in global deals, but financial restraints at home in recent months have made such deals more problematic.
“There are profound changes taking place in China and abroad that offer good opportunities for Chinese firms to undertake overseas investment but also carry risks and challenges,” the State Council said in the statement promoting the government’s Belt and Road initiative and sectors such as technology and manufacturing, which it said would continue to be encouraged,
However, deals in “sensitive” countries and regions would be restricted, it warned.