Outbound investment deals by Chinese firms slowing

Tech giants Tencent Holdings Ltd and Alibaba Group Holding Ltd were the most active Chinese companies in terms of overseas investment last year, according to a survey jointly released by the Hurun Report and Shanghai-based merger and acquisition advisory firm DealGlobe on Thursday.

Tencent and Alibaba made seven overseas investments in 2017, according to the 2018 China Enterprise Cross-border M&A Special Report. The transaction volume of Tencent's seven investments reached 38 billion yuan ($6 billion), with the largest used to acquire a minority stake in India's biggest e-commerce firm Flipkart.

Rupert Hoogewerf, founder and chief researcher at the Hurun Report, said Tencent and Alibaba's ambitious outbound investment reflected the entire process of learning, replicating, growth and innovation of Chinese privately-owned enterprises.

The transaction volume of Alibaba's overseas investments last year totaled 23 billion yuan. The largest was the 7.2 billion yuan investment in the Indonesian e-commerce platform PT Tokopedia, according to the report.

All of Alibaba's overseas investments focused on the technology, media and telecom industry (TMT). Tencent invested 5.85 billion yuan in US cancer detection startup Grail.

Of the top 100 overseas M&As by transaction value made by Chinese companies last year, 25 were in the TMT industry, nearly twice the number in 2016. However, out of the total last year, the TMT industry accounted for 83, second to the manufacturing industry with 114.

The transaction volume of Chinese companies' overseas investment in the TMT sector also contracted by 30 percent last year. The wait-and-see attitude of these companies could be due to the rapid development of the domestic blockchain market, Hoogewerf said.

In general, Chinese companies' overseas investment activity cooled in 2017 with a total of 400 overseas M&As last year, down 1.7 percent from 2016. Among these investments, 312 disclosed their transaction volume, which has declined 28 percent year-on-year to 960 billion yuan.

The transaction volume of the top 100 M&As has dropped by 37 percent year-on-year to reach 880 billion yuan.

"In 2018, Chinese firms' overseas investments will become more rational," said Feng Lin, founder and chief executive officer of Deal-Globe. "The Belt and Road Initiative will bring new opportunities, especially in the infrastructure, energy, mining and agriculture sectors."