China: Government prioritizes, curbs outbound investment

China’s State Council published guidelines to regulate mergers and acquisition to be made by Chinese companies worldwide, banning operations in sex, gambling and core military technologies; restricting those in entertainment, hotels and other low priority industries and encouraging deals that will support its Belt and Road Initiative, the state planner said on Friday.

This follows recent restrictions placed by the People’s Bank of China and the government on investment operations by Chinese multinational Dalian Wanda Anbang Insurance Group and other Chinese companies.

The National Development and Reform Commission (NDRC) critiqued in an online statement what it called “irrational” investments in entertainment and lauded the Belt and Road initiative announcing that it would provide better guidance on risks to companies investing overseas in order to prevent “vicious” competition and corruption.

The initiative is aimed at building a modern-day “Silk Road”, connecting China by land and sea to Southeast, South and Central Asia, and beyond to the Middle East, Europe and Africa.

The state planner cited unspecified security risks for Chinese companies investing abroad.

The NDRC did not give more details about how it planned to strengthen rules or why it was concerned about corruption and unhealthy competition between companies.

Also on Friday, the cabinet issued new guidelines to regulate overseas investment as the government looks to support capable firms investing overseas while restricting or banning deals in certain sectors.

“(We will) guide firms to fully consider national conditions and actual needs of target countries, pay attention to mutually beneficial cooperation with local governments and companies, and generate economic and social benefits,” the State Council said in a statement.

Mergers and acquisitions by Chinese companies in countries linked to the Belt and Road initiative have been growing at a rapid rate, even as the government takes aim at China’s acquisitive conglomerates to restrict capital outflows.

Full Content: Variety

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