Overview of China outbound investment in the first three quarters of 2019

EY released the Overview of China Outbound Investment in the first three quarters of 2019, according to which, China’s overall ODI in the first three quarters of 2019 amounted to US$87 billion, down 2.3% YOY; non-financial ODI was US$81 billion, down 1.3% YOY. The structure of China’s ODI continued to be optimized and diversified, investments in manufacturing, wholesale and retail grew by 3.2% and 12.4% YOY, respectively, despite the overall downward trend¹.

In the first three quarters of 2019, the announced value of China overseas M&As reached US$42.8 billion, down 44.6% YOY; the announced deal volume was 424, down by 31.2% YOY. China overseas M&A activities remained prudent, however, in Q3 M&A value saw a 152.2% increase QOQ, preliminarily reversing the downward trend. China overseas M&As continued to focus on the high-end value chain. By deal value, the M&A activities were dominated by consumer products, TMT, and financial services sectors; by deal volume, the top three sectors were TMT, advanced manufacturing & mobility and consumer products².

Loletta Chow, Global Leader of EY China Overseas Investment Network, says, “Facing the complex and volatile economic and trade environment in both China and overseas countries, we have seen consumer products sector taking the lead in overseas M&As. This is largely due to huge potential of domestic demand in China's consumer market, and the urgent need for stable and sustainable development. This also keeps stimulating Chinese enterprises to pursue M&As in the consumer goods sector overseas. On one hand, Chinese enterprises can expand in the global market, on the other hand, this can also ‘bringing in’ high-quality value chain to better serve the domestic market. In the meantime, Asia continued to be the most popular overseas M&As destination for Chinese enterprises, indicating the growing importance of regional economy. EY expects that China and other Asian countries will form closer ties in economy, trade and investment driven by the Belt and Road Initiative (BRI) in the future. Investors can focus on investment opportunities in area/countries such as ASEAN, Japan, South Korea and India.”

China’s ODI development remained healthy and orderly, the manufacturing and service sectors saw an increase despite the downward trend

In the first three quarters of 2019, China’s ODI continued to develop in a healthy and orderly manner. According to the Ministry of Commerce (MOFCOM), China’s overall ODI amounted to US$87 billion, down 2.3% YOY; non-financial ODI was US$81 billion, down 1.3% YOY. The main investment sectors in the first three quarters of 2019 were leasing and commercial services, manufacturing, wholesale and retail, accounting respectively for 33%, 17.5% and 10.5% of the total. Despite the overall downward trend, investments in manufacturing, wholesale and retail grew respectively by 3.2% and 12.4% YOY.

China overseas M&As target at high-end value chain, with Asia-Pacific being the top destination for Chinese investors

In the first three quarters of 2019, 424 overseas M&As were announced by Chinese enterprises, down 31.2% YOY, with a total value of US$42.8 billion, down 44.6% YOY. But announced M&As in Q3 reached US$19.8 billion, recorded an increase of 152.2% QOQ, while the YOY decline narrowed. In the context of the weak global economy and global geopolitical tension, China overseas M&As remained prudent.

Sector analysis:

Driven by the industrial transformation and upgrading, sectors that support structural adjustment, transformation and upgrading have gradually become popular for China overseas M&As. In the first three quarters of 2019, China overseas M&As were concentrated in high- value-added and high-technology sectors such as consumer products, TMT, financial service and advanced manufacturing & mobility.

• By deal value, China overseas M&As were dominated by consumer products (US$9.5 billion), TMT (US$8.5 billion) and financial services (US$6.2 billion) sectors, accounting for 56.5% of the total. Only the financial services sector achieved YOY increase while other sectors declined
• By deal volume, TMT (99), advanced manufacturing & mobility (70), and consumer products (57) were the top sectors for Chinese investors, accounting for approximately 53.3% of the total

Geographical analysis:

• In the first three quarters of 2019, Asia and Oceania both recorded double-digit growth, despite the overall M&A value falling sharply – Asia (US$14.7 billion, up 33.1% YOY) and Oceania (US$5.7 billion, up 18.1% YOY). Asia was the No.1 destination for China overseas M&As, accounting for over 30% of the total, with key sectors being TMT, financial services and real estate, hospitality & construction (RHC); whereas in Oceania, key sectors were consumer products, health & life science and RHC
• Investors still keep a wait-and-see attitude towards the European market. In the first three quarters of 2019, the announced M&As in Europe value decreased by 70% YOY to US$12.9 billion, which indicated that investments in this region remained prudent. Key sectors were consumer products, TMT and advanced manufacturing & mobility
• China overseas M&As in North America continued to be affected by geopolitical risks and policy resistance. In the first three quarters of 2019, the announced value of China overseas M&As in North America were US$4.1 billion, down 67% YOY, key sectors were TMT, financial services and mining & metals

Overseas EPC projects led to mutual benefit and win-win results, and drove local development

According to the MOFCOM, in the first three quarters of 2019, the total value of newly-signed China overseas EPC contracts decreased by 5.1% YOY to US$146.7 billion; the turnover decreased by 6.3% to US$102.1. Moreover, 528 new overseas EPC projects with a contract value of more than US$50 million were signed, increased by 11 projects YOY, accounting for 83.4% of the total. Newly-signed contacts in B&R countries increased by 18.4% to US$86.8 billion, accounting for 59.2% of the total. As of September 2019, China overseas EPC enterprises had created a total of 815,000 jobs for the host countries, which drove local development and achieved mutual benefit and win-win results.

¹ Source: MOFCOM
² Source: ThomsonOne, Mergermarket, including overseas M&As of Hong Kong, Macau and Taiwan and deals have been announced but not yet completed; EY analysis

- Ends -

Notes to Editors

About EY COIN

The China Overseas Investment Network (COIN) links EY professionals around the globe, facilitates collaboration, and provides consistent and coordinated services to our clients with overseas investment from China. Building on the existing China Business Group in the Americas, EMEIA, Asia-Pacific and Japan areas, COIN has expanded our network in more than 70 countries and territories around the world. Our globally integrated structure enables us to deploy dedicated teams with strong local experience, and profound industry knowledge to provide our clients with one-stop professional service from planning stage to execution stage to integration stage, helping our clients navigate through global markets.

Official site:www.ey.com/coin

WeChat official account:

COIN	EY Belt and Road Navigator

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation is available via ey.com/privacy. For more information about our organization, please visit ey.com.

This news release has been issued by Ernst & Young, China, a part of the global EY organization.

×

×

×

×

×