Opinion: China's big shopping sprees are so 2016

Gone are the mega deals for strategic assets in the West. Foreign fashion brands, commercial real estate and all things Belt and Road are safe
Opinion: China's big shopping sprees are so 2016
Global reach: China’s Belt and Road Initiative aims to spread the country’s business influence across the world
By Nisha Gopalan
Sun 16 Jun 2019 10:53 AM

China’s overseas M&A isn’t quite dead.

But you can forget the acquisition of strategic assets in the West: That $45.5bn record purchase by China National Chemical Corp of Swiss agribusiness firm Syngenta AG in 2017 is a thing of the past. With Beijing still worried about capital outflows, and protectionism deepening globally, the value of China’s deals abroad fell to $78bn last year from a peak of $222bn in 2016.

So, what is getting through? Infrastructure investment in emerging markets, for one, where the need for China’s money outweighs the desire to repel its influence. From Malaysia to Brazil, projects billed under President Xi Jinping’s Belt and Road campaign are forging ahead despite popular backlash. On the other side of the spectrum, deals that barely register on the geopolitical barometer are also squeaking by. These can include foreign fashion brands and commercial real-estate firms. Yet even these benign sectors could face roadblocks soon enough: National security is a slippery slope.

In this charged political climate, today’s safe targets could be on tomorrow’s blacklist

For now, Brazil remains a bright spot for Chinese dealmaking, particularly among state-owned firms. China Three Gorges Corp is looking to acquire the Brazilian assets of EDP-Energias de Portugal, having aborted a $10.2bn deal to buy the entire company in April. In May, China General Nuclear Power Corp forked out $739.2m for Italian multinational Enel SpA’s wind farms and solar plants in the Latin American country. But while Chinese companies have spent a cumulative $56.6bn in acquisitions in Brazil, relations between the two countries have been prickly in recent months as suspicions mount over Belt and Road. In April, President Jair Bolsonaro said, “The Chinese can buy in Brazil, but they can’t buy Brazil,” during a breakfast with journalists.

Buying retail brands

Foreign luxury brands have proven less contentious, particularly the European lines that mainland shoppers covet. Apparel company Shandong Ruyi Group, for instance, wants to become the LVMH of China: In January, it bought The Lycra Co, maker of the elastic material used in yoga pants, and eventually plans to take the company public. Ruyi has been on a buying spree of marquee fashion brands including UK trench coat maker Aquascutum and France’s SMCP SA, whose labels include Sandro and Maje. Last year, Shanghai-based Fosun International snapped up Lanvin, France’s oldest surviving fashion house, and is in talks to buy Thomas Cook Group’s tour-operator business. Meanwhile, investment firm Hillhouse Capital Management is buying Scottish whisky maker Loch Lomond Distillers. Asian investment firms often buy overseas brands with the aim of eventually bringing them into China.

Some of China’s largest acquisitions in developed markets have been companies that run warehouses

When a deal is huge – say, above $1bn – having partners can be an asset. A consortium including Chinese internet giant Tencent Holdings and Chip Wilson, the Canadian billionaire who founded Lululemon Athletica, helped China’s Anta Sports Products land its $5.2bn purchase of Finland’s Amer Sports Oyj, the maker of Louisville Slugger baseball bats.

‘Real’ deals

Commercial real estate has also been a relatively safe target: In recent years, some of China’s largest acquisitions in developed markets have been companies that run warehouses. China Investment Corp bought European logistics property business Logicor from Blackstone Group, while China Vanke led a group including Hillhouse in buying Global Logistic Properties from Singapore’s sovereign wealth fund.

Yet in this charged political climate, today’s safe targets could be on tomorrow’s blacklist. In France, even yogurt became a political lightning rod when the government blocked PepsiCo from buying Danone SA in 2005. Who’s to say we can draw the line at yoga pants?


Nisha Gopalan, Bloomberg columnist

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