Outbound investment expected to grow

Companies encouraged to continue operations internationally despite moves to curb risky deals

China's outbound investment is expected to continue to grow next year, despite efforts to tighten irrational - or risky and potentially disruptive - investments, the Ministry of Commerce said on Dec 23.

Ministry spokesman Shen Danyang told a news conference in Beijing that the authorities are encouraging companies to continue to expand and operate internationally.

"At the same time, we need to put a cap on irrational outbound investment in real estate, hotels, entertainment and sports to guard against risks," Shen said.

He said that special attention needed to be paid to companies making large-scale investments in fields outside their main business, companies of limited partnership and companies investing in overseas projects that are bigger than the mother company itself.

China's overseas direct investment in the first 11 months stood at $161.7 billion (154.86 billion euros; 132.08 billion), up 55.3 percent year-on-year. That growth rate is three times higher than for the same period last year.

The ministry did not elaborate on the rate the country's outbound investments are predicted to grow in 2017.

Some of the biggest investments in the current year included Wanda Group's purchase of US movie making company Legendary Pictures at $3.5 billion, Midea Group's takeover of German robot manufacturing company KUKA at $5 billion, and Anbang Insurance Group's acquisition of a luxury housing project from the Black Stone Group for $6.5 billion.

Four government departments - the National Development and Reform Commission, the Ministry of Commerce, the People's Bank of China and State Administration of Foreign Exchange - have recently made joint remarks about tightening irrational investment overseas.

Fu Hongyu, deputy director of the research center of domestic and overseas financial law at Beijing Foreign Studies University, says that on one hand investment in infrastructure construction - particularly in the Belt and Road Initiative region - is to be encouraged.

On the other hand, he adds, investments in areas where hot money and speculation thrive will be subjected to stricter review.

"Management of industries such as hotels, entertainment and sports is complicated because it is easy to rig the taxes and statistics, which makes them ideal channels for money laundering," Fu says.

yangziman@chinadaily.com.cn

(China Daily Africa Weekly 12/30/2016 page15)