Featured Policy Trend :: Chinese Outbound Investment


Featured Policy Trend :: Chinese Outbound Investment

Leveraging full attention-grabbing power, news sources seem to be outright shouting things like “46% drop in Chinese outbound investment”, “Outbound real estate investment falls to 51% 14-quarter low”, or perhaps more poetically, “investment ice age looms”. Professionals in the China outbound deals channel can’t deny that things haven’t been exactly rosy for the past year or so, but does it mean we’re all doomed?

In August of this year everyone finally got a glimpse into what Beijing meant by its 2016 declaration of outbound investment restrictions. However, the definitions were interpreted widely, from “China tightens rules on foreign investment” to “China’s outbound investment to further grow” (real news headlines, three days apart). Don’t feel bad if you’re confused; everyone was and might still be.

What both headlines were getting to in August was that Beijing semi-clarified what kinds of investments it is ok with and which ones do not align with China’s national strategy and goals (i.e. a no-go).

In August, investment types were categorized as prohibited, restricted and encouraged (see a good summary here). Prohibited and encouraged were relatively clear, but the restricted category (e.g. property, hotels, entertainment, sports clubs and film studios) didn’t offer more definition and left a lot of people hanging. In fact, what was meant to be clarification in August was more like a rehashing of what everyone had already known or figured. Back to square one; time to wait for the 19th Party Congress.

And the 19th Party Congress delivered - to an extent. It was a step in the right direction. The government released guidelines for overseas investment that would streamline outbound investment approval process for sums over $300 million and provide oversight for projects and sectors deemed sensitive. Punishment for dishonest investment practices would be increased. The guidelines were released to the public for feedback until December 3rd. The guidelines will follow a process before ultimately being approved, sometime in the future.

Until the government tells us more we’ll have to play by the current rules, which for Israel really aren’t that bad. Keep in mind that the government is encouraging Belt and Road investment, as well as investment which will bring technology and jobs to China.

The thing is, the investment restrictions that threw the world into a tailspin about this time last year isn’t new. These restrictions existed before, then were relaxed. That’s when China went on a global shopping spree and magic was happening. Investment restrictions are but a return to reality, essentially, but perhaps the pendulum will swing more yet. In the meantime, take the headlines with a grain of salt; we’re not all doomed.

Summary of information sourced from: FTSE Global Market, Reuters (Aug), Forbes, SCMP, CNBC (Aug), Reuters (Nov), CNBC (Nov)


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