Tuesday 20 March 2018

China's overseas investment rules target gambling and sex

Latest move by the Asian giant's cabinet could signal a further slowing of the flood of money from China to overseas countries Photo: Bloomberg
Latest move by the Asian giant's cabinet could signal a further slowing of the flood of money from China to overseas countries Photo: Bloomberg

Brenda Goh, Winni Zho and Philip McClellan

A recent crackdown by China on overseas investments has been assumed to be mainly focused on high-profile acquisitions of things such as hotels and football teams around the world.

However, Chinese regulators also appear to have their eyes on two other lower-profile industries: gambling and sex.

China's cabinet has issued rules on acquisitions abroad for the first time, possibly signalling a further slowing of the flood of money that has flowed overseas in recent years.

Investment in property, hotels, entertainment, sports clubs and film industries would be restricted as part of the new guidelines, which the cabinet said were aimed at defusing risks and preventing crime.

But it also said that overseas investments in the gambling and sex sectors, as well as exports of core defence technologies, would be banned, as such activities could endanger national interests and security.

The new rules and heightened scrutiny surrounding foreign investment in China "adds another layer of uncertainty and complexity to Chinese deals", said Tony Balloon, a partner in law firm Alston & Bird.

"As early numbers indicate, cross-border deal activity among Chinese companies has dropped in the first half of 2017 from the same period last year," he said.

Thomson Reuters data last week showed that all outbound mergers and acquisitions from China dropped 42pc year-on-year as of August 14.

But Chinese acquisitions in countries officially linked to the Belt and Road initiative, a signature foreign policy of President Xi Jinping, totalled $33bn (€28bn), surpassing the $31bn (€26.3bn) tally for all of 2016, the data showed.

Chinese companies have been on a global buying spree, snapping up football clubs, movie studios and skyscrapers, but they have hit road bumps in recent months thanks to financing restrictions.

"There are profound changes taking place in China and abroad that offer good opportunities for Chinese firms to undertake overseas investment, but also carry many risks and challenges," the State Council said in the statement.

It said investment that promoted the Belt and Road initiative, and in areas such as technology and manufacturing, would continue to be encouraged, but that deals in "sensitive" countries and regions would be restricted.

The state-run 'Chinese Securities Journal' reported that companies such as the insurer Ping An, Suning Commerce Group, a retail giant, and the conglomerate Dalian Wanda had responded positively to the new guidelines.

The newspaper quoted Wanda's chairman, Wang Jianlin, as saying that the company would strengthen its due diligence procedures.

The three companies have been among corporations whose overseas deal-making have been hit by Beijing's crackdown.

Other companies include HNA Group, Anbang Insurance, Fosun International and Zhejiang Luosen, which was behind the purchase of the AC Milan football club.


Irish Independent

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