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Will deals feel heat from capital outflow moves?

Reporter: Martina Fuchs 丨 CCTV.com

12-12-2016 16:45 BJT

The Chinese government has increased its efforts to clamp down on illegal investment activities and curb capital outflows over the past couple of days. That's as the yuan  plunged to more than eight-year lows. Our Martina Fuchs reports on how the government's moves will impact outbound private equity deals going forward.

The timing couldn't have been better. The 8th Global Private Equity Beijing Forum this Sunday took place at a crucial moment.

Chinese authorities are trying to calm market concerns, after stepping up measures to crack down on fake outbound investment activities and stem capital outflows.

Some believe there is no change in government policies to encourage Chinese companies to "go global", and the outbound mergers and acquisitions pipeline won't be interrupted.

The record number of M&As from China this year has put deal flows under the spotlight.

Chinese regulators said they would step up the supervision of "irrational" overseas acquisitions outside of businesses’ core areas, especially in the hospitality, film and sport industries.

These are all sectors where Chinese companies have been behind a string of high-profile takeovers.

The renminbi has been depreciating since last year, in the face of a rising dollar, which triggered a capital flight and money moving out of the country.

And China's foreign exchange reserves fell to the lowest level in nearly six years in November, dropping to $3.05 trillion. That was a decline of 2.2 percent from the previous month.

"The renminbi has been among the better-performing emerging markets currencies in the wake of last month’s US presidential election. But it is down 6.1 per cent since the start of January and on track for its worst year since Beijing ended its hard dollar peg in 2005," said Martina Fuchs.

The impact of the new measures will not be fully visible until December forex levels are released next month.

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