China’s Economic Stimulus and Open Borders Boosting Dealmaking
Bankers are receiving increased interest in mergers, acquisitions, and fundraising involving China, as Chinese policymakers work to rebuild private-sector confidence and growth. This renewed focus on boosting the economy, along with the reopening of China’s borders, has improved the outlook for deals.
This comes after the country’s economy was impacted by the COVID-19 pandemic and a regulatory crackdown. Experts predict that sectors linked to China’s economic growth, such as strategic industries, advanced technology, automation, and semiconductors, will be the primary focus of dealmaking in the coming year.
Mark Webster, the head of Singapore at BDA Partners, an investment banking adviser with a focus on Asia, stated that these areas will be the primary focus of outbound activity. He stated that both domestically and internationally, healthcare opportunities are gaining attention, particularly in Southeast Asia. Indonesia, in particular, is drawing a lot of interest.
Additionally, Australia has caught China’s attention as there is hope for a diplomatic improvement between the two countries. An example of this is the joint venture between Tianqi Lithium and IGO, which is currently bidding for lithium miner Essential Metals.
Last year, the number of outbound M&A deals involving Chinese companies decreased by half and reached its lowest point since 2006, as shown by data from Refinitiv. This decrease also led to the overall lowest point of Chinese company-led dealmaking in nine years.
Additionally, Refinitiv data revealed that Chinese companies’ capital markets deals dropped by 44% during the same period. This decline affected the revenue earned by Wall Street banks and resulted in some of them reducing jobs, specifically those related to Chinese deals, in recent months.
Regulatory scrutiny thawed, allowing overseas Chinese IPOs to resume after they had been halted for 18 months due to proposed rule changes. Additionally, the tech sector faced challenges with new regulations.
The reopening of the border allowed for the resumption of travel between Hong Kong and mainland China, which had been restricted for three years, changing the routine of advisers who regularly traveled to China.
As a result, Bagrin Angelov, head of China cross-border M&A at Chinese investment bank CICC, predicts that private equity funds will increase deals in China in 2023 as they search for buyers for their assets. According to Pitchbook data, Chinese private equity activity decreased from $57.8 billion in 2021 to $24.1 billion in 2022.