Documents issued by the National Development and Reform Commission (NDRC) and by the State Council explain China’s new acquisitions restrictions.
The NRDC lists three categories of overseas investment: banned, restricted and encouraged. Those that are banned include sex and gambling industries and military technology. A number of investments were listed as restricted including property, film, entertainment, sports, holiday and obsolete equipment. This will put any proposed deal under increased scrutiny.
Dalian Wanda was forced to undertake a $1 billion reshuffle of their assets earlier this month. In July, Wanda announced the sale of $9 billion of leisure and hotel assets in China following the government’s instruction to banks to cease lending to their foreign operations.
Some companies focused on property rather than the real economy
Variety reports The State Council as saying: “Profound changes are taking place in international and domestic situations, and Chinese enterprises face not just relatively good opportunities but also various risks and challenges in overseas investments.
“Some companies focused on property rather than the real economy, which, instead of boosting the domestic economy, triggered capital outflows and shook financial security.”
China began introducing a movement against overseas investment last year, with the incremental introduction of capital outflow restrictions and greater deal scrutiny.
By contrast, China is seeking to actively encourage projects which support the Belt and Road Initiative, a huge infrastructure scheme to help promote trade between Eurasian countries that has been compared to a 21st century Silk Road.