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Chinese Outbound M&A Lags Behind Global Average, Data Show

Completed mergers and acquisitions by Chinese companies in 2021 grew 24% but global M&A grew 71%, a Baker McKenzie-Rhodium study found

China's WH Group bought US-based Smithfield Foods in 2013. Photo: Reuters.


Chinese outbound foreign direct investment (OFDI) managed to hold steady in 2021 compared with the previous year, but contrasting with a sharp rebound of global investment flows, a study has shown.

Completed mergers and acquisitions (M&A) activity by Chinese companies fell more than 17% to reach $24 billion in 2021, compared to $29 billion in 2020, according to an analysis by law firm Baker McKenzie‘s and data consultancy Rhodium Group.

But global M&A grew 71%, according to Refinitiv data. In the past five years, China’s OFDI has fallen steadily due to greater domestic hurdles for outbound capital flows as well as a more complicated regulatory environment abroad.

Beijing has complained that the US imposes restrictions to block cross-border acquisitions of technology companies by Chinese companies.

“With increased foreign investment scrutiny from overseas regulators, particularly in the technology sector, many Chinese companies are also pursuing domestic options,” Jannan Crozier, chair of Baker McKenzie’s M&A practice group, said.


Decline Especially Acute

The decline in M&A has been especially acute and China’s strict pandemic measures have further weighed on outbound dealmaking in 2020 and 2021, contrasting with a strong recovery in global cross-border M&A during the same period.

“Additionally, while Chinese OFDI to Europe, North America and Asia has not come close to its 2017 peak, it will be interesting to see how other markets such as Oceania, Africa and Latin America are shaped by Chinese investment in 2022,” Crozier said.

“What is certain, however, is that we can expect a dynamic and exciting year for both Chinese and global M&A activity.”

Europe led the modest recovery in 2021 with over $8.4 billion worth of completed Chinese deals. Asia and North America were second and third with $4.8 billion and $4.7 billion.

M&A in Latin America halved to $3 billion in 2021 from $6 billion in 2020, while acquisitions in Oceania and Africa totalled $1.5 billion.


Less Sensitive Sectors

Less sensitive sectors such as consumer products and services ($5.2 billion) and entertainment ($4.6 billion) were the top attractions for Chinese outbound M&A globally, accounting for almost half of total investment.

Transport and infrastructure ($3.8 billion), financial and business services ($3.3 billion), basic materials ($1.8 billion), and health ($1.2 billion) made up the rest of the top six.

Slowed deal-making since 2017 has resulted in a situation where China is under-invested in the world compared to its economic footprint, which suggests substantial catch-up potential if pandemic restrictions and policy headwinds were to subside.

“Chinese investors remain strongly interested in overseas expansion, and growth of outbound investments by Chinese investors would have been stronger if not due to the continued disruption of the global pandemic in 2021,” Zhang Hong, head of private equity at the FenXun law firm in Shanghai, said.

“A desire for broader market entry, strategic synergy, access to resources and new energy, expansion of technology or product portfolios are all key considerations driving Chinese investors’ interests in looking abroad,” she added.


  • George Russell




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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.


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