China’s open borders and bid to boost the economy could revive deals, advisers say

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By Scott Murdoch, Yantoultra Ngui and Roxanne Liu

SYDNEY/SINGAPORE (Reuters) – China’s reopened borders and renewed focus on boosting its sluggish economy have turned the outlook for deals as bankers pick up interest in mergers, acquisitions and stockpiling. ‘ capital involving the second largest economy in the world.

The prospect of a business revival comes as Chinese policymakers seek to restore private sector confidence and growth, which have been dented by the COVID-19 pandemic and a crackdown strong regulatory.

Although consumer, retail and travel businesses are expected to return after a nearly three-year lockdown, consultants say the sectors linked to the strengthening of China’s economic outlook will be the focus of deals this year.

“We see strategic sectors, hard industrial technology, automation and semiconductors as a focus for overseas activity,” said Mark Webster, partner and head of Singapore at BDA Partners, an Asia-focused investment banking consultancy.

“Healthcare opportunities are proving interesting, both domestically and internationally, including in Southeast Asia,” he added. “Geographically, Indonesia in particular attracts a lot of attention.”

Australia has also already appeared on China’s radar amid hopes of a diplomatic thaw between the two countries. In one such deal, Tianqi Lithium and IGO’s joint venture bid for lithium miner Essential Metals.

Outbound mergers and acquisitions involving companies in China halved over the past year, hitting their lowest level since 2006, data from Refinitiv, which took over total of deals led by Chinese companies to the lowest level in nine years.

According to data from Refinitiv, capital market transactions by Chinese companies fell by 44% during the same period. That fall has hurt Wall Street banks’ fees and forced some of them to shed jobs, mostly those related to Chinese businesses, in recent months.

“We’ve had a lot more requests for quotes from companies in the last two or three weeks,” said Li He, capital markets partner at law firm Davis Polk, who traveled to Beijing to meet with clients the day after the reopening. -Chinese border. on January 24th. 8th.

“It’s not just because of travel, but people think reopening is good for the economy, good for the capital markets and good for doing business,” he said.

The reopening coincided with a thaw in regulatory scrutiny that had seen foreign Chinese listings stall over the past 18 months due to proposed rule changes and left the tech sector grappling with a slew of new regulations.

Travel from Hong Kong to mainland China was severely restricted for about three years before the border was reopened – a stark change for the advisers, for whom weekly trips to China were common.

Open borders could lead to a pick-up in private equity fund deals later in 2023 as companies travel to China to find buyers for their assets, according to Bagrin Angelov, China’s head of cross-border mergers and acquisitions at the Chinese investment bank CICC.

China’s private equity activity totaled $24.1 billion in 2022, compared with $57.8 billion a year earlier, Pitchbook data showed.

“Six months or a year before the deal, private equity firms had already started meeting with potential buyers to generate interest and understand who might be interested,” said Beijing-based Angelov.

“For them, certainty is very important and they really need to meet buyers very early,” he continued. “Because of the opening, we expect an increase in overseas private equity sales to Chinese buyers.”

(Reporting by Scott Murdoch in Sydney, Yantultra Ngui in Singapore and Roxanne Liu in Beijing. Editing by Gerry Doyle)

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