China's Outbound Investment Plunges as Irrational Deals Curbed

(Bloomberg) -- China’s non-financial outbound investment slumped to $86.3 billion in January to October, plunging 41 percent from a year earlier, as projects in some industries dried up.

There were no new real estate, sports or entertainment deals for the period, the Commerce Ministry said in a statement Thursday. Most outbound investment was in leasing and business services, manufacturing, wholesale and retail sales and information technology services.

"Irrational" outbound investment has been curbed further, the ministry said, repeating the language it has used this year as authorities push to halt capital outflows. That’s reversing an unbroken streak of acceleration since at least 2010: Outbound investment soared 44.1 percent last year to $170.1 billion, about four times the 2009 level, Mofcom data show.

"The combination of hardened capital controls and a crackdown on outbound M&A has dented China’s overseas investment," said Tom Orlik, chief Asia economist at Bloomberg Economics in Beijing. "A short-term downturn was necessitated by the pressing need to stabilize the yuan. Sustained for too long, falling overseas investment would be tough to square with ambitions for greater international influence through the Belt and Road program."

New rules in August for overseas investments made explicit a de facto campaign against "irrational" acquisitions of assets in industries ranging from real estate to hotels. Investments in property, hotel, film, entertainment and sports are subject to restrictions.

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