China’s outbound mergers and acquisitions (M&A) activity could jump, as US president-elect Donald Trump’s tariff threats accelerate the globalisation of mainland enterprises, according to industry experts.
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Bracing for the possibility of 60 to 100 per cent tariffs on Chinese goods, firms in the world’s second-largest economy are exploring ways to reduce reliance on the US, albeit in a frail global M&A environment beset by high interest rates and ongoing geopolitical tensions.
“More tariffs may mean that the globalisation of Chinese companies is going to get faster,” said Stanley Lah, Asia-Pacific and China M&A services leader at Deloitte. “Chinese companies will consider moving faster to look for alternatives in shipping or selling to the US. That is quite loud and clear.”
M&A activity should emerge as a speedier solution to satisfy Chinese companies’ objective of being more effective in global markets, compared with greenfield investments such as setting up sales offices or manufacturing facilities, he added.
Chinese outbound M&A deals fell 16.5 per cent to US$17 billion so far this year, compared with the same period last year, according to London Stock Exchange Group data. Last year, the tally rose 59 per cent year on year to US$27 billion – still far below the 2016 peak of US$202 billion.
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Dealmakers have seen some rebound in China’s outbound M&A, especially in the sectors with Beijing’s “blessings”, according to Federico Bazzoni, CEO of investment banking at Vantage Capital Markets.
“I see some activities coming back in specific sectors,” he said, mentioning manufacturing, technology, new energy such as solar power and batteries, and “a little bit” on consumer products. “Valuations are coming down.”