China: 2020 Outbound M&A Lowest in a Dozen Years
Completed Chinese outbound mergers and acquisitions totaled just $29 billion in 2020, according to law firm Baker & McKenzie, down nearly half compared to 2019 and the lowest since the global financial crisis.
Completed Chinese outbound M&A fell from $53 billion in 2019 and a record-high of $139 billion in 2017 to its lowest level since 2008, according to a recent report by Baker & McKenzie.
Chinese foreign direct investments (FDI) into Europe continued a downward trajectory in 2020 to $7.5 billion, down from $13.4 billion in 2019. Chinese M&A transactions in Europe were aimed at medium-sized targets across a diversified range of sectors including real estate and hospitality, automotive, and energy.
North America Surprises
Despite ongoing tensions between China and the U.S. or Canada, FDI into the U.S. grew more than one-third from $5.5 billion in 2019 to $7.7 billion this year.
Entertainment, health and biotech, and natural resources were the top sectors for the region and major billion dollar deals were inked including Tencent’s stake in Universal Music and Zijin’s stake in Canada’s Continental Resources.
Bottoming Out
According to the report, 2020 likely saw the bottom for outbound Chinese investments «as political and macroeconomic headwinds set to moderate for Chinese investors in 2021, leading to more potential deals». Foreign M&A into China also rebounded strongly in the second half of 2020 to reach full-year levels similar to 2019.
«Recent signals – most importantly the transition to a new US administration and a successful conclusion of the CAI (comprehensive agreement on investment) – point toward a more constructive global environment for Chinese companies compared to the previous four years, which could help improve investor sentiment and risk appetite,» said Tracy Wut, Baker McKenzie's head of M&A for Hong Kong and China.
CAI Boost
The recently signed CAI was a major boon for the E.U. and China, mutually opening market access for investors from both economies.
«With the improved access across various industries in China under the CAI (comprehensive agreement on investments), we expect to see more investment opportunities for EU investors in industries such as manufacturing, automotive, financial services, healthcare, telecommunication, cloud services, transportation services,» said Cherrie Shi, senior counsel at FenXun Partners, Baker McKenzie's joint operation partner in China.
«Chinese investors will be provided with greater access in the manufacturing, energy wholesale and retail, and renewable energy markets of the EU.»
