Chines economy slowdown makes business go global

Chines economy slowdown makes business go global

Cooling down of the Chinese economy is the main reason behind the growing number of Chinese outbound mergers-and-acquisitions deals, experts told Sputnik on Thursday.

Last week, Business Insider reported in 2015 China hit a record high in its business activity abroad concluding 607 outbound deals with total value of $112.5 billion. In January 2016, 82 outbound deals took place worth $73 billion.

According to Kent Deng, the London School of Economics and Political Science’s Associate Professor (Reader) in Economic History, the internal Chinese conditions "push" the businesses outside the country.

"Over investment and over production inside China have gone too far. Many companies are forced to look for alternatives. The Japanese did this since the 1980s. It is a response to China's deteriorating domestic economic environment."

Duncan Innes-Ker, the regional director for Asia of The Economist Intelligence Unit, agrees that this surge in the Chinese external economic activity should be attributed to the slowing of the local economy but draws attention to the easing of the government’s restrictions in the area.

"The easing of restrictions on outbound investment and the slowing of the domestic Chinese economy have encouraged Chinese firms to look abroad for investment opportunities."

Dunkan Innes-Ker added that the Chinese outbound investment is breaking out of traditional fields like resources since Chinese firms are looking at overseas investments to acquire intellectual property and talented workers, and to tap into market opportunities in other countries.

"The trend of strong outbound investment is likely to continue over the next few years and the government remains generally supportive. However, there is a risk that policies designed to shore up the renminbi's exchange rate could delay some deals in the first half of 2016," he pointed out.

Vanessa Rossi, an advisor on Global Economics and Finance at Oxford Analytica, also believes that economic problems in China are the main motive for business to go global.

"With China cooling down (and with yet another rise in the trade account surplus), companies see more clearly the need for this global diversification."

Rossi added that this expansion is not spontaneous since Chinese companies had spent time making assessments of what they want to buy and how to operate abroad, having prepared to this new stage of entry to the global economy.

Source: Sputnik