Chinese companies spent a record US$227 billion (Br 7.6 trillion) acquiring foreign companies last year – six times what foreign companies spent acquiring Chinese firms.

Chinese companies were involved in some of 2016’s biggest global deals, including ChemChina’s $44-billion acquisition of Syngenta, the largest single outbound M&A deal in Chinese history. Despite activity cooling this year, observers are already predicting another record year in 2018 as the long-term growth trend resumes. 

Last year’s strong growth continues the pattern of recent years, with the increase in outbound M&A averaging 33 per cent annually over the past five years. But this year, regulatory controls on foreign exchange have slowed things down, with the Chinese government expressing concern at the risks of some types of outbound investment, and discouraging mega-deals of $10 billion or more as well as large acquisitions outside a buyer’s core business. Largely for these reasons, the value of outbound M&A deals by mainland Chinese companies reached $12.5 billion in the first quarter of 2017, a decline of 85 per cent from $82 billion a year earlier, according to Mergermarket.

PWC expects outbound M&A activity for the full year to decline slightly, before regaining its growth momentum in 2018. According to McKinsey, there is still enormous potential for further increases. As a portion of GDP, Chinese companies are spending just under 1 per cent of GDP on outbound acquisitions compared with EU companies’ 2 per cent and US companies’ 1.3 per cent.

While it would be easy to assume that M&A activity is part of Beijing’s efforts to boost China’s influence internationally, this does not appear to directly be the case. Hardly any of the M&A deals have been done by government-linked investment funds such as the Africa Fund and the Silk Road Fund, which tend to focus on project financing. And although China Investment Corporation (CIC) has taken many stakes in foreign companies, these have been purely portfolio investments.

Another assumption is that capital flight is behind the long-term growth trend. But while some investors have undoubtedly moved their capital offshore as the renminbi has weakened, McKinsey notes that the currency has fallen against the dollar only since 2014, well after the growth in outbound M&A started.

As for the kinds of companies attracting the Chinese, these are much more varied than they used to be – by sector and by geography.

 The nation’s deal-making started as a hunt for the raw materials needed to feed steel mills, support industrial production and keep factories operating – before 2013, notes Bloomberg, acquisitions were dominated by state-owned companies acquiring iron ore deposits in Australia, energy producers from Canada, and copper mines in Africa. But in the years since, the focus has shifted to acquiring the brands and technology China needs to transform itself to a new kind of economy, driven by domestic consumption more than exports. Accordingly, targets have been much more diversified, including assets such as Italian football teams, American film studios and French fashion houses. 

Only a very brave pundit would dare predict how much of the corporate world outside of China will ultimately be owned by Chinese companies. But it seems safe to assume the figure will be considerably higher than its current level.