Although infrastructure dominates China’s outbound Belt and Road investment, investors are increasingly looking at ASEAN market deals for services and resources
Since it was announced in 2013, the Belt and Road Initiative has brought about profound and positive impact on ASEAN countries, transforming their ports, rail, road and power infrastructure at a phenomenal rate.
More recently, responding to the Initiative’s objectives to facilitate connectivity among Belt and Road countries and to achieve diversified and balanced development, the scope of China’s ASEAN investments has expanded beyond infrastructure into mergers and acquisitions (M&A).
According to global accounting and consulting firm EY, the real value of China’s M&A in Belt and Road countries rose to US$48.2 billion in 2017, an increase of 81% year-on-year, while investment in ASEAN reached a new high, accounting for a 25% share of China’s M&As for that year – one marked by generally lower Chinese outbound M&A activity.
As statistics compiled by Thomson Reuters show, China’s investors are increasingly viewing ASEAN as offering more than just returns linked to infrastructure and have already sealed deals involving energy, finance, technology and telecommunications.
The region’s natural attributes – a young labour force, rising education levels, growing middle class and abundant natural resources such as metals, minerals and geothermal energy – all add to ASEAN’s attractiveness as an investment destination.
By deal volume, technology, media and telecommunications investment together with diversified industrial products, have topped investment for two consecutive years (2016-2017).
Deals making the news
Notable ASEAN M&A deals involving Chinese investors in 2017 included Nesta Investment Holding’s acquisition of warehouse and storage service Global Logistics Properties for US$1.64 billion and Alibaba’s US$2 billion majority stakeholder takeover of online retailer Lazada South East Asia.
The Alibaba Group’s interests also extended to Indonesia with a US$1.1 billion minority share of Jakata-based retail unicorn PT Tokopedia. Other key investments involved the Bank of China (Hong Kong)’s acquisition of the Jakarta branch of Bank of China, with a price tag of US$224 million, and a majority stake in a lead and zinc mine for US$198.8 million.
Energy and power continues to attract Chinese investors. Last year, CGN bought the assets of Edra, a Malaysian state-owned power distributor, for US$2.29 billion while Shanghai Pharma secured local healthcare equipment supplier Cardinal Health in a deal worth US$576 million.
Finance, telecommunications and semiconductor technology attracted significant deals in the Philippines with power, electronics, forestry products and banking dominating deals in Thailand. Food, financial, technology and real estate were just some areas targeted by Chinese outbound investors in Vietnam.
Indications are positive that this widening sphere of investment will continue well beyond 2018 running tandem with ongoing Belt and Road infrastructure projects.
