In the news: China kicks off 2017 with strong inbound M&A, a push to simplify the national drug distribution network and develop its own digital currency

Inbound M&A takes flight

While overseas acquisitions by Chinese buyers are cooling after two record years, deals into the country are on the rise, with new rules making it easier for foreign direct investment (FDI). Inbound M&A has already reached $7.1 billion so far in 2017, nearly double the amount of the same period of last year and on track to beat the 2016 total of $46 billion, Thomson Reuters data showed. Outbound transactions fell more than 40% to $8.6 billion, not least because of increasing scrutiny on capital outflows. Deals in the retail and consumer sectors accounted for nearly half of the inbound activity, far outpacing the traditionally dominant real estate and financial deals. The firm leading the investment trends has pledged to focus on “high-growth sectors based on consumer trends, like health-related food and beverage products, healthcare, education, cinema or entertainment, or anything linked to kind of cultural production and content.” In sharp contrast to China's exceptionally strict outflow policies, the government's encouragement of FDI has been evident in various streamlining of administrative approval processes and market entry relaxations in once-restricted industries. Most recently in January, the State Council pledged to open up specific financial and manufacturing services sectors, abolish the minimum registered capital requirement for foreign investors to ensure a uniform system for both Chinese and overseas enterprises (though the promise of equal treatment has been on the table for a while now), and encourage MNCs to establish their regional headquarters in the PRC with the ability to centrally manage their FX funds. This renewed focus on boosting inflows is likely to stay for a while, because it suits China's efforts to globalize the renminbi and arrest a decline in its FX reserves.

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