Date
26 September 2017
Dalian Wanda founder Wang Jianlin said his company will focus on the domestic market and countries along the Belt and Road routes. Photo: Reuters
Dalian Wanda founder Wang Jianlin said his company will focus on the domestic market and countries along the Belt and Road routes. Photo: Reuters

China’s overseas buying spree coming to an end

Chinese companies have been on a foreign buying spree in recent years, inflating the prices of hotels, consumer brands, entertainment companies, sports clubs and other assets.

However, the nation’s overseas acquisition streak seems to be coming to an unhappy ending.

The central government has explicitly discouraged companies from making irrational investment abroad, and the nation’s top banking regulator has requested loan checks on several leading Chinese conglomerates like Wanda, Fosun and HNA.

That might affect the landscape of the football industry in Europe. For example, Italy’s top two football clubs, Internazionale Milano and Associazione Calcio Milan, have been acquired by Suning Holding Group and Chinese businessman Li Yonghong respectively.

But state broadcaster China Central Television has raised questions about Suning’s takeover of the loss-making soccer club, alleging that the motive could be to launder money.

Such a harsh criticism could have a chilling effect on Suning, China’s largest home-appliance retailer, and force it to hold back plans for high-profile overseas acquisitions.

The market for soccer player transfers also has seen several mega deals this summer. Manchester United have agreed a 75 million pound (US$97.63 million) deal for Everton striker Romelu Lukaku. Paris Saint-Germain’s Qatari owners are keen to have Brazilian footballer Neymar for 220 million euros (US$256.3 million).

By contrast, both AC Milan and Inter Milan have not made any big transfer deals. Instead, they’ve signed four less-known soccer players with each costing around several million euros. As a result, the two football clubs may struggle to compete with other European soccer clubs in the new season.

Football clubs are just one of the foreign assets targeted by deep-pocketed Chinese firms. They have also shown strong interest in hotels, consumer brands, cinema lines and entertainment companies.

Dalian Wanda Group has spent nearly US$10 billion acquiring cinema lines abroad, including AMC, Hoyts, Oden & UCI and Carmike.

It has also snapped up US film studio Legendary Entertainment for US$3.5 billion and acquired UK yacht maker Sunseeker. Wanda also bought a stake in Atletico de Madrid football club.

Being such a high-profile shopper of overseas assets, Wanda has found itself in the cross hairs of Chinese regulators.

Fosun and HNA Group are also in a buying spree abroad in recent years. Fosun snapped up Club Med, Folli Follie, Cirque du Soleil, Tom Tailor, British football club Wolves and several other foreign assets. HNA Group has bought stakes in Hilton, Deutsche Bank, Ingram Micro as well as hotels and properties worldwide.

China’s acquisition frenzy has pushed up asset prices considerably. It’s rumored that US supplement company GNC Holdings is in acquisition talks with Fosun, and Wanda intends to take over Paramount Pictures. HNA Group is in talks to buy a controlling stake in the owner of the publisher of Forbes magazine.

However, some of these deals may not push through after Chinese regulators tightened their scrutiny.

As a result, the prices of some of these overseas assets may be pushed back to reasonable levels. That means Beijing’s cooling interest is likely to impact the global M&A market.

The Chinese government does not intend to crack down on all overseas acquisitions. Instead, it encourages Chinese firms to seek opportunities in regions along the Belt and Road routes.

This indicates that Chinese firms may shift their acquisition focus to Southeast Asia, central and western Asia, the Middle East and Africa.

For example, Wanda’s founder Wang Jianlin openly said that his business empire would concentrate on domestic markets and countries along the Belt and Road routes in the future, heeding Beijing’s call.

This article appeared in the Hong Kong Economic Journal on July 25

Translation by Julie Zhu with additional reporting

[Chinese version 中文版]

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BN/CG

Hong Kong Economic Journal columnist

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