HORIZONS | BDO'S GLOBAL VIEWOF MID-MARKET DEAL ACTIVITY 45
GREATER CHINA M&A SLOWS BUT FOREIGN INVESTMENT SURGES
GDP TARGET SET AT 5.5% FOR 2022
down from the original forecast of 5.4% in October 2021. Current key concerns on China's economic growth in 2022 include disturbances to trade caused by the recent increase of COVID-19 infections in March 2022, the resulting lockdowns and credit default risks of Chinese property developers from 2021.
In January 2022, China announced that its GDP grew by 8.1% during 2021. Although GDP growth reduced from 4.9% in Q3 2021 to 4% in Q4 2021, the overall 2021 GDP was slightly above the 8% growth expected by the International Monetary Fund and the World Bank and beyond the 6% target set by China itself. This growth in 2021 was driven by the recoveries of several advanced economies from the downturn caused by the COVID-19 pandemic. Total exports from China also rose 29.9% from a year earlier, the highest level since 2011, due to the improved foreign demand for industrial products from China in 2021. The momentum of China's economic recovery further improved in January and February 2022. According to the China National Bureau of Statistics (NBS) in March 2022, retail sales of consumer goods also reported a y-o-y increase of 6.7% in the first two months of 2022. However, China set a GDP target at 5.5% for 2022 in March 2022, the lowest official goal since 1991. In April 2022, the World Bank revised its expected growth rate of 5% for the China’s GDP in 2022,
BIG PICTURE
FDI GROWTH IN 2021 AND EARLY 2022
• Mid-market M&A deals in the Greater China region declined in Q1 2022. The year-over-year (y-o-y) deal volume dropped by 21.8% from 417 deals in Q1 2021 to 326 deals in Q1 2022. Deal values also fell by 35.7% from USD 38.4bn in Q1 2021 to USD 24.7bn in Q1 2022. • Compared with the previous quarter, deal values fell by 54.7% from USD 54.5bn in Q4 2021 to USD 24.7bn in Q1 2022. Similarly, deal volume declined by 44.8% from 591 deals completed in Q4 2021 to 326 deals in Q1 2022 • The proportion of private equity buyouts to the total mid-market deal volume also fell from 9.8% in Q4 2021 to 9.2% in Q1 2022. However, PE deal value did increase from 16.6% in Q4 2021 to 20.6% in Q1 2022.
According to the Ministry of Commerce (MOC), China’s foreign direct investment (FDI) increased by 14.9% from USD 156bn in 2020 to USD 174bn in 2021. The FDI growth in 2021 mainly took place in the services and high-technology sectors. Furthermore, the registered number of foreign investment enterprises increased by 23.5% to 48,000 in 2021. In particular, investment into China from countries along the Belt and Road Initiative and the Association of Southeast Asian Nations (ASEAN) increased by 29.4% and 29% respectively. China was the world’s second largest FDI recipient for the five years from 2017 to 2021. The MOC announced that China’s FDI expanded 37.9% y-o-y to USD 37bn in January-February 2022. The growth
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