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Chinese Firms Dump Overseas Investments At Near-Record Pace

Tyler Durden's Photo
by Tyler Durden
Tuesday, Sep 07, 2021 - 03:00 PM

The last half-decade was full of Chinese firms acquiring overseas businesses, but the flow appears to be reversing as buyers turn into sellers amid lofty valuations and the need to divert monies into more profitable areas.

"These days, Chinese companies are proactively looking at their asset portfolios, rather than simply buying," Bagrin Angelov, head of China cross-border mergers and acquisitions at China International Capital Corp., told Bloomberg in an interview. "When there is a good offer, they are open to at least evaluate it."

Data compiled by Bloomberg shows Chinese companies have already divested $10.5 billion worth of overseas assets. The current trajectory suggests a record-setting year, surpassing last year's $15 billion. 

Source: Bloomberg

The latest round of selling isn't coming from distressed Chinese sellers but rather ones who bought businesses with robust cash flows - whose valuations have surged over the past year due to global central banks unleashing unprecedented amounts of liquidity into the global financial system, putting a bid under assets. 

Chinese companies are also selling infrastructure and utility firms. Beijing Capital has listed a New Zealand business it bought in 2014 for $667 million for more than $1 billion. 

China Three Gorges Corp. is selling a 25% stake in its overseas renewable energy asset portfolio that could be valued upwards of $2 billion. 

"It's good timing for these companies to monetize," Miranda Zhao, head of mergers and acquisitions for Asia Pacific at Natixis SA, told Bloomberg. "These assets provide healthy yields under the current low interest-rate environment and are attractive to other strategic investors in the region or infrastructure funds."

China's Creat Group Corp has received interest in selling its share in German blood plasma supplier Biotest AG. 

Overseas divestments help Chinese firms build additional cash piles and refocus monies into more productive areas, like buying foreign semiconductor companies. A few months ago, UK's Newport Wafer Fab was acquired by Chinese-owned Nexperia NV.

Cheap money injected into financial markets by central banks has inflated assets over the past year and given the Chinese the ability to dispose of overseas bets for a handsome return and at a near-record pace. 

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