China Backs Off on Overseas Investments

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Zhong Shan, the commerce minister of China, urged businesspersons to slow down on irrational overseas investments.

Last year, China scored a new record when it comes to overseas investments. Many Chinese companies sought to invest outside the country and bought businesses valued at a total of $225 billion. This record number marked the Chinese business leaders as a new global power. However, policy makers are worried of to how much extent money is leaving Chinese territory. With this idea in mind, the authorities are urging businesspersons to slow down this expansion.

Commerce Minister Calls for Cognition over Overseas Investments

Even though the portfolio of companies in China extended to unbelievable heights, Zhong Shan, the commerce minister, perceives this movement as imprudent. The minister defined this expansion as “blind and irrational investment.” During the annual meeting of Congress in China, Zhong Shan announced at a news briefing several future plans. To mitigate this situation, he stated that officials are going to strengthen their monitoring over a selected number of companies.

“Some even have had a negative impact on our national image” stated Mr. Zhong who is also a trusted personality in President Xi Jinping’s  political entourage. By this, he referred to several enterprises that left a negative trail after the completion of their acquisitions overseas.

Repercussions of the Recent Comments

Even though the company didn’t explain the event, Wanda Group failed to honor the deal on Friday with Dick Clark Productions, the producer of Golden Globe Awards. The Chinese conglomerate led by the Wang Jianlin was supposed to conclude an already announced purchasing act with Dick Clark Productions last week. However, it was Wanda Group that didn’t honor the $1 billion agreement. It is uncertain if this sudden shift is related to Beijing stepping in or if this was a realization of a big mistake.

It was not only companies but also Chinese families, who relied on overseas investments for their economy. They felt how the national finances are slowing down amid a weak currency and other such issues. China had to cover around $1 trillion expenses during the last two and a half years to support the value of the currency.

On the other hand, companies are showing signs of leaving the irrational investments behind and heading for safer territories. A managing partner at DLA Piper, a law firm in China, Qiang Li, stated “There is no question that investors will continue to invest overseas, by getting the proper approvals.” He explained this projection as an observation of the recent deals in which he participated. Only a quarter of them continued to get money out of China. The rest of them relied on dollars that are owned by China and which they already got in circulation overseas.

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