According to recent reports from the US media, in the past 18 months, the upsurge of foreign mergers and acquisitions in China was unprecedented in the past 10 years, and most of the M&A transactions were driven by American and European companies. With China's new opportunities to relax restrictions on foreign shareholding, US and European companies continue to be optimistic about the Chinese consumer market with great potential during the epidemic.
A few days ago, the US Consumer News and Business Channel (CNBC) reported that in the past 18 months, the upsurge of foreign mergers and acquisitions in China was unprecedented in the previous 10 years, and most of the M&A transactions were driven by American and European companies. With China's new opportunities to relax restrictions on foreign shareholding, US and European companies continue to be optimistic about the Chinese consumer market with great potential during the epidemic.
CNBC quoted the latest report released by American Rongding Consulting Group on the show, saying that as long as China continues to occupy a considerable share of global economic growth, foreign investors will maintain strong momentum in the acquisition of Chinese assets. The merger and acquisition of foreign companies to Chinese companies has reached an unprecedented scale in the past 18 months, which is in sharp contrast to the "decoupling theory" that American politicians declared during the epidemic.
Fortune Magazine published an article titled "Despite Trump's threat of "complete decoupling", but global investors have never been so hungry for (mergers and acquisitions) transactions in China", which also cited Rongding Consulting Group The report pointed out that despite the threat of "decoupling" from US President Trump, foreign investment in China is still quite resilient. In the past, foreign investment in China focused on large-scale greenfield investment projects rather than acquisitions. Over the past 10 years, the average annual M&A of foreign capital in China has ranged from US$20 billion to US$25 billion. This scale is negligible for the Chinese economy. But since 2018, such transactions have begun to rise, reaching a 10-year high of $35 billion last year. This year, foreign investment in China has been steadily increasing. So far, the amount of M&A transactions in China has exceeded China's outbound M&A. What exactly is contributing to the global appetite for Chinese assets? The report believes that the key factor is that US and European companies believe that the rise of China's middle-income group is still the best growth point in the world.
Henry Farrell, a professor at George Washington University, and Abraham Newman, a professor at Georgetown University, recently published the "Stupidity of "Decoupling from China" on the website of the US "Diplomacy" bi-monthly magazine. Not only will it cut off healthy and important economic relations with China, but it will also cut off economic links with other countries in the world. The article compares the Sino-US economy to a pair of "conjoined twins", "connected by nerve tissue and sharing a common organ and blood circulation system", saying that "decoupling" countries with complicated economic relations is like doing a complicated operation It is best to carefully understand where the patient's vital organs are located before moving the knife. The implication is that the wrong place under the scalpel will eventually damage itself.
The laws in the international economic and trade field cannot be changed by the release of extreme rhetoric by US politicians who have "decoupled" from China. The Wall Street Journal reported on June 15 that despite the economic and trade frictions, the bilateral trade volume between China and the United States climbed to nearly US$39.7 billion in April, an increase of nearly 43% from February. This means that China has once again become the largest trading partner of the United States, once again proving the absurdity of the so-called "decoupling". "The Wall Street Journal" lamented that under the epidemic, "for the United States, China is the bright spot in the darkest situation of US global trade."
Craig Allen, chairman of the US-China National Trade Commission, further pointed out that China may become the "largest engine" of global economic growth this year and next, and he hopes that American companies will benefit from it. Obviously, American companies that really participate in production and sales and bear market risks will not obey the blind orders of some politicians based on political self-interest.
The World Bank’s latest Global Economic Outlook report released on June 8 predicted that the US economy will shrink by 6.1% in 2020 due to the impact of the new coronary pneumonia epidemic, and the Chinese economy will be the only major economy in the world to achieve growth in 2020 . According to the latest "World Economic Outlook" report released by the International Monetary Fund on June 24, the global economy will generally shrink in 2020, and China is the only major economy in the world. China will achieve an economic growth of 8.2% by 2021. The US economy will contract by 8.0% in 2020 and rebound to 4.5% by 2021.
Goldman Sachs Chief Japanese Equity Strategist Kathy Matsui pointed out: "The world is interconnected, and China's sustained economic growth is critical for almost all major economies in the world." Obviously, no matter from the perspective of economic laws or objective reality The so-called "decoupling" from China is not feasible, but is only the dream of some American politicians.
The Rongding Consulting Group report shows that even in the shadow of the epidemic, the amount of Chinese investment projects announced by US companies in the first quarter of 2020 is still as high as US$2.3 billion, only slightly lower than last year’s quarterly average. The report pointed out: "American companies do not seem to consider significantly reducing their investment in China." In addition, there is another reason that cannot be ignored because the current US economic structure determines that it is difficult to undertake some jobs. ". In the past half century, the United States has evolved from an industrial superpower to a country that mainly relies on services such as finance to support economic development. There is a huge gap in infrastructure and a shortage of manufacturing talent. If they are "decoupled" from China to engage in manufacturing, the United States may not even find labor.
The report also shows that most M&A activities in China are driven by US and European companies that take advantage of (China)'s looser foreign ownership restrictions or have high expectations for Chinese consumer demand. The report believes that the enthusiasm of US and European companies for M&A in China has soared mainly for three reasons. One is optimistic about China's vigorous consumer demand; the second is that China welcomes foreign investment in policies; the third is that increasingly mature Chinese companies are more attractive to foreign investment. Industry experts said that the Chinese market is very large, and many foreign investors are focusing on China's long-term rather than short-term business development.
CNBC's article on June 21, titled "Despite Beijing's political tensions as it opens its doors, foreign companies are still snapping up Chinese companies," pointed out that as global uncertainty intensifies, more foreign companies are launching acquisitions in China. , Including (mergers and acquisitions) transactions in more sensitive financial and technology industries, and more US and European companies believe that they can achieve faster growth through acquisitions in China.
