China Seeks to Impose ‘Strict Controls’ on Foreign Investments by Chinese Firms
China is looking to control the foreign investments made by Chinese companies. The country aims to stem the flow of domestic capital to overseas. It is expected that a series of measures in this regard will be announced soon.
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According to The Wall Street Journal, the government is likely to focus on the transactions involving 'extra-large' acquisitions undertaken abroad. Investment deals worth $10 billion or more will be covered under the new initiative. The regulators are also expected to pay special attention to any property investments worth more than $1 billion made by state-owned firms.
The report also stated that any investment worth $1 billion or more undertaken by any Chinese firm in a foreign company not related to its prime business may be scrutinized.
The new regulation is expected to help the government in curtailing the outward flight of capital from the country. China is also struggling with the constant decline in its currency value. The rumored law is expected to improve the situation by keeping capital in the domestic territory.
The first nine months of the current year saw a 50 percent growth in foreign investment by Chinese companies on year over year. Chinese firms aggressively pursued foreign technology and media companies, spending over $145.9 billion during the said time period.
Apart from the Chinese government, foreign authorities have also increased their scrutiny of Chinese acquisitions. Recently, Germany ordered the review of Aixtron acquisition by Chinese firm Grand Chip. The deal was deemed to be worth over $730 million. The country cited security concerns as the cause for review.