Stunted domestic growth compels China curbing outward investment

The Chinese government has made its intentions clear: it will curb investments made by Chinese companies on foreign assets. Chinese companies in recent times have pushed up their overseas spending in 2016. Their target list included Aston Villa Football Club and Godzilla maker film studio. One Chinese concern even purchased the pub where Xi Jinping, the Chinese premier and David Cameron, the ex-Prime Minister of Britain shared a pint.

Huge overseas investments

Beijing is right to profess concerns. Chinese companies are scheduled to spend about 1.12 trillion Yuan on British and American investments. The resultant glut of spending led to about 55 percent rise in overseas investment on non-financial assets. This spending put companies from China to spend about $159 billion dollars in 2016. In 2015, it was only $86 billion.

A number of cash rich Chinese investors have diversified their spending all across the world. Money spent is distributed across a number of sectors in 2016. One of the biggest overseas investments made by the Chinese is by the Insurer Anbang. The company spent a massive $6.5 billion to buy Strategic Hotels & Resorts, a luxury group. The seller was Blackstone, the private equity group. The flooding of Chinese money into premium American property has not abated since then. It is to be said that Anbang is no stranger to such big ticket deals- it had earlier paid about $1.95 billion to Hilton Hotels for the landmark Waldorf Astoria property in New York. The property is an art deco building and is one of the most fabled hotels in the world.

Affirmative action

Flight of capital is a major concern of the Chinese Government. This occurs when investors transmit money out of China and not invest it within the country. The latter spurs domestic growth. Gao Hucheng, the Commerce Minister of China, said that Beijing will soon take action to solve investment gaps by curving of overseas spending by Chinese companies. It will also take steps to make access easier for foreign firms to invest in China and enjoy the fruits of the Chinese economy. The Chinese Government is reputedly preparing the ground for a clampdown on any non-Chinese acquisitions and mergers. According to a blog maintained by the ministry, the Chinese authorities will reduce all curbs imposed on access by foreign investors in 2017. The steps will make it much easier for overseas companies to spend cash in People’s Republic. Details on this matter, however, was not available.

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