China Inc. & Billionaires Dodge Capital Controls via Global Buyout Binge. Government Not Amused

China is going to crack down on capital flight with new methods, in addition to all the methods that are already not working. This time, it’s going after the big ones, the ones that might be using the overseas acquisition binge to dodge capital controls. This time, “according to people with direct knowledge of the matter and documents reviewed by The Wall Street Journal,” the State Council is planning to impose reviews and controls on big overseas deals.

Currently, companies going after overseas M&A only have to register with Chinese authorities, but there’s now drawn-out review. Under the new rules, the Commerce Ministry and the top economic planning agency can subject larges deals to more scrutiny. These deals include:

  • Foreign acquisitions of $10 billion or more
  • Property investments by state-owned companies of $1 billion or more
  • Investments of $1 billion or more in an overseas entity that is unrelated to the acquirer’s core business
  • Overseas direct investments made by limited partnerships
  • Investments of less than 10% in companies traded on overseas stock exchanges
  • Chinese capital trying to participate in the delisting of overseas-listed Chinese companies.

And there’s a political wrinkle. The Journal:

The new controls, once in place, are to remain in effect until the end of September and thus are intended as a temporary tool to stabilize outflows ahead of a major reshuffle of the top echelon of the ruling Communist Party late next year, the people familiar with the matter said. That’s in keeping with other efforts by Beijing to try to keep the economy on an even keel before the leadership change.


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