Beijing looks to stem Chinese capital flight and encourage FDI

Chinese Commerce Minister Gao HuchengChinese capital flight: The Chinese government is getting ready to curb its private sector’s appetite for overseas mergers and acquisitions and to encourage inward investment by sharply reducing restrictions on foreign investment access in 2017 to make it easier for overseas firms to spend their cash in the People’s Republic, according to a blog posted on the Ministry of Commerce’s website earlier this month. The government would “promote the healthy and orderly development of outbound investment and cooperation in 2017, ” Commerce Minister Gao Hucheng is quoted as saying.
By the ministry’s own estimates, Chinese companies will end up having bought overseas assets worth approximately $160bn over the course of 2016, compared to $106bn in the previous 12-month period 2015. With FDI set to remain broadly flat at $113bn, the gap between outward and inward investment now stands at an unprecedented $47bn, raising concerns about the extent of capital flight from its weakening economy.
Hinkley Point CMajor deals concluded in the past year include the Anbang Insurance Group’s $6.5bn acquisition of Strategic Hotels & Resorts from the Blackstone private equity group Blackstone and the 30% stake that the state-backed China General Nuclear secured in the UK’s Hinkley Point C nuclear power plant. for $6bn. During the course of 2016 the Dalian Wanda conglomerate also bought the California-based Legendary Studios and the Chinese travel firm Ctrip bought the Skyscanner flight comparison sight for $1.4bn
Guochan LaiA number of Chinese entrepreneurs have also been indulging their passion for English football with entrepreneur Guochan Lai buying West Bromwich Albion for a sum thought to be between $184m and $246m; Tony Xia spending around $93m on Aston Villa, even after the club had been relegated from the Premier League; and the Fosun International investment group paying $55m to gain control of Wolverhampton Wanderers
GwadarWhile the government in Beijing may be looking to stem this trend, its ambitions to use public-sector investment in major overseas infrastructure projects to extend its influence continues unabated. Last week, just days after it confirmed that it was to build a steel factory in the Pakistani port of Gwadar as part of the multi-billion China Pakistan Economic Corridor (CPEC) initiative, it announced that it is to extend Islamabad a further $8.8bn in soft loans for three new road projects.
This will take China’s investment in CPEC up to approximately $51bn.

Source: theguardian