Date
24 September 2017
PetroChina parent CNPC did not make a single major overseas investment in the first half. Top executives have been investigated or detained for alleged corruption. Photo: Bloomberg
PetroChina parent CNPC did not make a single major overseas investment in the first half. Top executives have been investigated or detained for alleged corruption. Photo: Bloomberg

War on graft squeezing China outbound deals

China’s unrelenting anti-corruption campaign is beginning to squeeze outbound investment, reversing nearly 10 years of rising spending overseas.

Chinese companies had spent US$39 billion on overseas mergers, acquisitions and greenfield projects bu the end of June, down from US$46 billion in the same period a year earlier, the Financial Times reported Monday, citing the Heritage Foundation which closely monitors Chinese investment flows.

Lack of Chinese offshore energy investments this year is the main reason for the slowdown which experts largely blame on President Xi Jinping’s anti-corruption campaign that has particularly targeted the energy sector.

Dozens of top executives of China National Petroleum Corp., the state-owned parent of listed PetroChina, have been investigated or detained on corruption charges over the past year.

The company did not make a single big offshore investment in the first half of this year.

In July Zhou Yongkang, the former security chief, became the most senior official to be accused of corruption.

Zhou was known as the leader of the “petroleum gang”, a faction within the ruling Communist party with deep and longstanding ties to the Chinese state-owned energy sector.

Investments in foreign markets beyond the reach of the Chinese authorities have been a favorite vehicle for corruption and money-laundering in recent years, according to officials and Chinese executives familiar with the matter.

Chinese state-owned companies regularly overpay for global acquisitions which sometimes involve kickbacks or secret deals, the report said.

Amid the anti-corruption campaign, which began in 2013 but ramped up significantly this year, many state enterprises are reluctant to make any offshore investments because of the perception these deals are often corrupt.

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RC/RA

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