China foreign investment drops $100 billion in 1 year.

Bloomberg, Gadfly

Bloomberg, Gadfly

From a high of ~$246 billion in 2016, China spent $100 billion less on foreign M&A purchases in 2017, according to Bloomberg's Gadfly.

That's a whopping 40% decline in one year.

In this year's August edition of NextPerspective, I wrote about the crackdown in offshore investment into hotel, casino, film industry, sport, entertainment and other restricted - and in some cases - banned investments, with the central authority instead encouraging rail and shipping investment into OBOR (i.e., Xi's One Belt One Road program) and other more 'rational' investments.

Clearly, this policy had started to bite before it was made official.

Gadfly also reports that following the recent Communist Party Congress, China says it will expand its oversight to offshore units of Chinese companies. Approval notification starts at $300m under draft legislation and if and when this is set in stone it will effectively close off the practice of making acquisitions (at these levels and above) from alternative jurisdictions, e.g., Hong Kong. 

For Australia, this means a declining investment appetite from one of our largest investors for so-called 'irrational' investments, but it also suggests to me that sound Australian investment situations levered to OBOR should not be shy in courting Chinese interest.


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