BEIJING — China’s government has made it harder to move money overseas. It has said it would punish companies for investing in certain sectors. It has told firms to report all cross-border deals.
Despite all that, Chinese companies continue to go global.
Zhejiang Geely Holding Group, the Chinese company that bought Volvo Cars in 2010, said on Wednesday that it would acquire an 8.2 percent stake in AB Volvo, a Swedish manufacturer of trucks, from the activist investment firm Cevian Capital. The deal, valued at $3.2 billion based on a New York Times calculation, would make Geely the truck maker’s largest shareholder.
It is the latest sign that Chinese companies are still on the lookout for deals — provided they are in line with the government’s strategic goals.
Entertainment and real estate purchases are not likely to pass muster, but industrial, mining and energy companies often get the green light. The approach fits the government’s agenda.
China is trying to build geopolitical ties overseas with large infrastructure projects that depend heavily on steel, cement and machinery. At home, it wants to develop domestic giants in areas like artificial intelligence and renewable energy to compete with Western stalwarts.
“It’s not like they are pulling back. ‘I can’t do what I wanted, so now I’m done.’ They are seeking out projects that are still of interest,” said Geoffrey Sant, a partner at the law firm Dorsey & Whitney who advises Chinese companies on acquisitions. Mr. Sant said his clients, some of whom had been looking at real estate and hotels, were now considering investing in mining and aviation.
“I think it takes a certain kind of person who would want to do cross-border deals, and those people don’t want to just give up,” he said.
China has to be more picky about its deals.
A flood of capital outflows has put pressure on the currency. And the economic outlook has been damped by the debt-fueled acquisition binge of some big conglomerates.
As such concerns have risen, China has aggressively sought to curb outbound investment.
In a statement on Tuesday, the National Development and Reform Commission, the Chinese government agency that oversees economic planning, said the country’s companies would have to report all foreign investment deals through a new online system. It said it would establish a mechanism to supervise overseas deals “so as to better safeguard national interests and national security.” In August, Beijing said it would forbid acquisitions in sectors ranging from entertainment and sports clubs to hotels, reiterating a warning issued late last year.
There are some signs the new rules are having an effect. Chinese companies spent about $147 billion in cross-border deals this year, according to Dealogic, a data provider. That is sharply lower than last year, when in a record buying spree they poured $217 billion into a wide variety of overseas businesses, including movie companies and soccer clubs.
But the government is not against all acquisitions. China said it would approve acquisitions by “qualified companies” and encourage deals that supported the “One Belt, One Road” initiative, President Xi Jinping’s ambitious push to increase China’s influence through infrastructure projects across Asia, Africa and Europe.
In the last four months, Chinese companies spent about $36 billion on outbound mergers and acquisitions, Dealogic data showed. Many have concentrated on industries like energy and infrastructure. China’s State Grid Corporation, for example, bought the Brazilian power holding company CPFL Energia last month for $3.4 billion. And Yancoal, which is majority owned by the Chinese coal giant Yanzhou Coal Mining Company, has bought Australia’s Coal & Allied.
The Geely deal plays to the country’s ambitions.
Geely, led by Li Shufu, was a relatively early proponent of deal-making. When it bought Volvo from Ford Motor, it became the first Chinese carmaker to acquire a foreign rival. It has been one of the first Chinese companies to get its technology through acquisitions, rather than joint ventures.
It has shown no signs of letting up: Along with the deal announced on Wednesday, it said in November that it had acquired Boston-based Terrafugia, which is building flying cars.
Ash Sutcliffe, a Geely spokesman, said the company was not worried about whether the new rules on outbound investment would affect the AB Volvo deal. “We are very confident that deal will go ahead,” Mr. Sutcliffe said. “Geely has a long history of overseas investments. I don’t think it will be a major issue.”
There are good reasons for Geely to make such an investment. Analysts are forecasting a boom in sales of gas trucks as China tries to wean its truckers off diesel vehicles, part of wide-ranging efforts by the authorities to reduce emissions. Because the government wants to improve the transportation sector, officials are likely to approve the deal, according to Mats Harborn, president of the European Union Chamber of Commerce in China.
There are, however, downsides to the state’s having such a strong role in directing overseas acquisitions. When China shows interest, costs tend to rise.
“The problem is that as everyone is directed to the same investment, the price of the investment might be driven up,” Mr. Sant said. “And they are becoming irrational investments because everyone is bidding for the same projects.”
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