08-25-2017, 10:32 PM
China has tightened the purse strings on foreign investment, but the government's crackdown could completely backfire, hurting the very companies it's seeking to firm up. Chinese companies had been on a massive shopping spree — outbound deals hit a new record every year since 2009, soaring 500 percent to a whopping $200 billion last year. But authorities grew worried about economic and financial risks. Cash flying offshore added more pressure to an already weakening yuan, and it was unclear how much debt firms were taking on to buy everything from luxury resorts to soccer clubs.
Acquiring at significantly high prices reached a peak in 2015, the year the Fosun deal closed. The median value of China's overseas acquisitions hit 16 times EBITDA, versus the global median of 13 times, according to Dealogic data. That means Chinese companies were acquiring firms at much higher valuations than global peers.
China may be crippling some of its largest companies with a crackdown on investment