HORIZONS | BDO'S GLOBAL VIEWOF MID-MARKET DEAL ACTIVITY 45
CHINA M&A REMAINS VIBRANT IN STRONG FINAL QUARTER
China’s mid-market M&A activity recorded a strong finish to the year with a significant increase in deal value and a smaller rise in deal volume in Q4 2021. ENHANCED FOREIGN INVESTMENT ENVIRONMENT China saw inbound investment grow in 2021. According to the Ministry of Commerce of PRC, China’s foreign direct investment (FDI) during the first 11 months of 2021 was around USD 157bn, exceeding the full-year FDI recorded in 2020. As part of efforts to promote its foreign direct investment market, China shortened its two negative lists for foreign investment in December 2021, which became effective in January 2022. The key revisions are as follows: • The number of sectors that are off- limits for foreign investors reduced from 33 to 31 in the latest 2021 national negative list, according to the National Development and Reform Commission (NDRC). The NDRC statement also removed foreign ownership restrictions on carmakers and removed a previous cap limiting the number of vehicle joint ventures a foreign investor can set up in China.
• The number of sectors for foreign investment access in the pilot foreign- trade zone (FTZ) negative list declined from 30 to 27 in the 2021 version. All manufacturing sectors will be open to foreign investors in the pilot FTZs. In addition, the services sector will be more accessible to foreign investors. However, ownership by foreign investors should be no more than 33% and the legal representatives should have Chinese nationality. • The latest negative list included prohibited sectors such as compulsory education institutions, news organizations, rare earth minerals, publishing, nuclear power stations and telecom. China has also been actively promoting free trade in Asia. The Regional Comprehensive Economic Partnership (RCEP) agreement took effect in January 2022, which involves 10 member countries of the Association of Southeast Asian Nations plus Australia, China, Japan, New Zealand and South Korea. Tariffs on more than 65% of trade in goods are expected to reach zero under this agreement. This will encourage firms to use South East Asia as a production base, which can accelerate the diversification of supply chains and
BIG PICTURE
• Total deal volume in Greater China decreased by 5.06% from 612 deals in Q4 2020 to 581 deals in Q4 2021, mainly driven by a decrease in the property market services and TMT sector deal volumes. However, deal value increased by 11.8% from USD 47.7bn in Q4 2020 to USD 53.3bn in Q4 2021 • Compared with the previous quarter,
deal value increased by 35.4% from USD 39.4bn in Q3 2021 to USD 53.3bn in Q4 2021. Similarly, deal volume increased by 13.7%, from 511 deals in
Q3 2021 to 581 deals in Q4 2021 • The proportion of PE buyouts in
relation to total mid-market deal value and volume declined respectively from 21.9% and 11.2% in Q3 2021 to 16.9% and 9.5% in Q4 2021.
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