The People’s Republic of China (“China”) has, for many years, been the driving force of global growth, generating average GDP growth of c.7% over the last 5 years, well above many other G20 countries. The Chinese Government estimates that growth in GDP will amount to c.6.5% in 2018, a figure which is likely to position China as contributing approximately one third of global economic growth in 2018.
Recent headlines have highlighted that China’s larger and more transformational cross-border transactions are being scrutinised more closely by central Government and have dropped off lately. However, mid-market M&A is set for continued growth with Chinese corporates now expected to undertake more serial mid-market transactions to achieve their strategic objectives.
The recent publication of Chinese President Xi Jinping’s One Belt One Road (“OBOR”) strategy is likely to help drive this expected uptick in general M&A activity with Chinese corporates and investors actively looking at Western acquisition opportunities to help prepare them for the longer-term OBOR initiative which China is implementing. Certain key strategic sectors are being targeted by the Chinese Government including:
- advanced manufacturing technology
- technology businesses across a range of industries
- renewable and clean technology
- consumer brands
Chinese corporates generally enjoy access to readily available capital and there is a willingness of state-owned banks to lend to corporates, particularly if capital is being deployed to pursue acquisition activity which follows the OBOR strategy.
The UK is likely to emerge as a major beneficiary to this to initiative owing, amongst other things, to its stable political, economic and regulatory environment and transparent legal system.
Although we are currently observing the headwinds of a possible trade war between the US and China and the continuing uncertainty over Brexit in Europe, the Chinese growth story and her appetite for making acquisitions in the UK and Europe is likely to remain robust for some time.
Transcend Corporate’s China office is located in Hong Kong, the main gateway to business between mainland China and the rest of the world.
