Chinese outbound deals focused on Europe says Baker McKenzie

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Chinese outbound foreign direct investment has focused on Europe and North America in the first six months of 2018 according to a new report from Baker McKenzie.

The global law firm says that announced Chinese M&A in the first half of 2018 included a total of U$22 billion directed at Europe while $2.5 billion headed to North America.

Completed Chinese FDI in the period was down sharply in the US to $2 billion from $24 billion in the first half of 2017; completed European FDI reached $12 billion.

"The scale and speed of the diverging trends revealed by these figures is remarkable," said Thomas Gilles, Chair of Baker McKenzie's EMEA-China Group. "At the same time, no-one should be surprised by the direction of travel - China is actively courting the EU with offers of reciprocal market access in an attempt to show foreign investment is not a one-way street, while trade relations with the US continue firmly on a downward path."

The research, which was done in association with independent research firm Rhodium Group, also reveals that globally, the half-yearly value of newly announced global M&A activity by mainland Chinese companies has stabilised from a peak of $145bn in 1H 2016 to $50bn in 1H 2018, down 32% drop compared to 2H 2017. However, this is still significantly above the 6-month average of $39bn seen in 2013-2015.

“China plays a vital role in driving the global economy and it's clear outbound investment is continuing at a more measured and sustainable pace, even if the geographic mix is changing," said Danian Zhang, Chief Representative of Baker McKenzie's Shanghai office. "What is important

for Chinese investors is that the deals that do progress involve real economy sectors with sound business planning and objectives, that can be operated in a safe business and regulatory environment. It is normal that there is a mix of buying and selling activities for outbound investment projects as corporate health after all requires acquiring as well as disposing of assets."

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