Overview of China outbound investment of H1 2023

In terms of M&A deal value, the top three popular sectors in H1 2023 were power & utilities, financial services, and advanced manufacturing & mobility, together accounting for 54% of the total deal value. Power & utilities experienced a substantial growth of 438%, while financial services and real estate, hospitality & construction also recorded certain increases. Notable large transactions announced in the second quarter this year included: 1) a Chinese enterprise acquiring two power distribution businesses and energy service companies in Peru (totaling approximately US$2.9 billion), which will help the Chinese enterprise expand and consolidate its presence in the Latin American market; 2) a Chinese enterprise acquiring a real estate investment trust in the UK (approximately US$1 billion).

In terms of deal volume, the popular sectors were TMT, advanced manufacturing & mobility, and financial services. TMT remained the top hot sector, announcing 69 transactions, accounting for over 30% of the total deal volume, far surpassing other sectors.

• Latin America: The announced M&A deal value by Chinese companies in Latin America ranked first for the first time in nearly a decade, reaching US$3.2 billion, up 1,737% YOY. In recent years, China’s circle of friends in Latin America has been continuously expanding, with Brazilian president’s visit to China in H1 2023, Honduras establishing diplomatic relations with China, and China and Argentina signing a cooperation plan under the BRI. These developments have facilitated the progress of China-Latin America economic and trade relations. Additionally, the 16th China-Latin America Entrepreneurs Summit is scheduled to be held in Beijing in the second half of this year, which is expected to further promote exchanges and cooperation between Chinese and Latin American companies for mutual development. The economic growth of major Latin American countries this year is expected to be 2.6% for Mexico, 2.4% for Peru, and 2.1% for Brazil, leading other Latin American nations. However, Argentina’s economy is expected to decline by 2.5%⁴.
• Europe: The announced M&A deal value by Chinese companies in Europe was US$3 billion, the lowest for the same period in nearly a decade, with a YOY decrease of 44%. The volume of announced deals was 61, declining by 24% compared to the previous year. Over 40% of the M&A deal value was invested in the financial services sector, with other popular sectors including mining & metals and real estate, hospitality & construction. The main destinations for investments were the UK and Germany, with M&A deal values rising against the trend by 117% and 91%, respectively. The two countries’ combined M&A deal values accounted for 86% of the total announced M&A deals in Europe. Lately, high-level visits between China and Europe have been frequent, and China attaches great importance to the European market in terms of economic and trade cooperation. In June this year, Chinese Premier Li Qiang made his first official visit to Germany and France after taking office. Leaders from both Germany and France expressed their opposition to any form of “decoupling” and welcomed Chinese companies’ investment in their countries. In the future, China is expected to deepen cooperation with Germany and France in areas such as automobile manufacturing, high technology, new energy, digital economy and semiconductors. In 2023, the overall economic growth of European countries will be weak, with relatively high inflation levels. The Eurozone is expected to grow by only 0.9% this year, far below the global average of 3%, and Germany is expected to decline by  0.3%⁴.
• North America: The announced M&A deal value by Chinese companies in North America was US$2 billion, a YOY decrease of 28%, with 49 announced deals, representing an increase of 11% compared to the previous year. North America is the only continent where the M&A deal volume has increased. The TMT sector saw a significant growth in transaction volume by 150%, mainly directed toward software development and electronic components. M&A deals in the healthcare & life sciences and TMT sectors accounted for 75% of the total M&A deal value by Chinese companies in North America. Currently, the US inflation rate has decreased to around 3%⁴. It is predicted that the US economy will grow by 1.8% this year, with strong growth in consumer spending. The IMF has revised its forecast for the US economy by 0.2 percentage points higher than the April forecast⁴.
• Asia: The announced M&A deal value by Chinese companies in Asia was US$1.6 billion, a YOY decrease of 61%. The number of announced deals was 87, a YOY decrease of 3%. The top three M&A destinations in Asia were Vietnam, Singapore and Japan, accounting for 64% of the total M&A deal value, with investments in Vietnam showing a counter-trend increase, with both the investment amount and number of deals increasing by over 200%. Overall, investment activity has increased in ASEAN countries, with a YOY growth of 35% in the number of M&A deals. The main sectors for Chinese M&A in Asia were real estate, hospitality & construction, financial services and advanced manufacturing & mobility. It is predicted that India and the ASEAN-5⁶  countries will grow by 6.1% and 4.6% respectively this year, with the Philippines and Vietnam leading ASEAN with economic growth rates of 6% and 5.8%, respectively⁴.
• Oceania: The announced M&A deal value by Chinese companies in Oceania was US$1.4 billion, up 225% YOY. The investments were mainly in Australia’s mining & metals, real estate, hospitality & construction, and consumer products sectors.
• Africa: The announced M&A deal value by Chinese companies in Africa was US$610 million, down 24% YOY. The investments were mainly in South Africa and Egypt’s advanced manufacturing & mobility sector. A major transaction in the second quarter was the acquisition of a South African cement producer by a Chinese company, which was a key move in the company’s active overseas development strategy and will strengthen its leading position in the region. China has become the fourth-largest source of investment in Africa and remains the largest trading partner⁷. Recently, the third China-Africa Economic and Trade Expo was successfully held in China, with the number of signed agreements reaching a record high. China-Africa economic and trade cooperation is moving towards a new stage of high-quality development. This year, East African countries are expected to maintain high economic growth, with Ethiopia, Kenya and Tanzania expected to grow by 6.1%, 5.3% and 5.2%, respectively⁴.