Europe was the top destination for China's overseas merger and acquisition (M&A) deals by both value and volume in the first quarter this year, after falling behind Asia for three consecutive quarters, according to a new report by consulting firm Ernst & Young. Europe and Asia were the most popular destinations for China's overseas M&A deals in the first three months of 2022, accounting for more than 70% of the total. The value of the deals in Europe reached USD2.13 billion, down 74% year-on-year, while the deal volume was down by 20%. By value, the investments were made mainly in Germany, Italy and the Netherlands, and in the healthcare and life sciences sector, the technology, media, and telecom (TMT) industry, and financial services. Investments in Asia, totaling USD2.11 billion, were made mainly in India, Singapore and South Korea.
Benefiting from the steady and persistent progress of the Belt and Road Initiative (BRI), and increased demand for regional supply chain optimization under the Regional Comprehensive Economic Partnership (RCEP), the world's largest free trade deal, Asia is expected to continue to be a key region for China's outbound investment, according to the report. China's outbound direct investment (ODI) rose 7.9% in the first quarter from a year earlier to reach USD34.29 billion, data from the Ministry of Commerce (MOFCOM) showed. Non-financial direct investment in countries along the BRI routes reached USD5.26 billion, up 19% year-on-year, accounting for 19.5% of the total in the first quarter, an increase of 1.7 percentage points compared with the same period of the previous year.
China's overseas M&A value stood at USD5.9 billion, a drop of 65% on a yearly basis and hitting a record single-quarter low, according to the EY report. “China's GDP growth was generally stable in the first quarter, up 4.8% year-on-year. Yet, the evolving pandemic situation might further affect enterprises' operations. To sum up, the momentum of China's overseas M&As might continue to slow down, and global supply chains might be impacted by geopolitical factors,” said Loletta Chow, global leader of the EY China overseas investment network. In recent years, China overseas M&A deals experienced higher volatility whereas China's ODI steadily developed, with more overseas green-field investment amid stricter foreign scrutiny of cross-border M&As, the Global Times reports.
