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June 9, 2017

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Scrutiny cools M&A appetite

CHINESE companies cooled their appetite for mergers and acquisitions this year as the government tightened scrutiny on cross-border investment flow, Ernst & Young said in a survey yesterday.

The firm found 44 percent of Chinese companies said they have five or more M&A projects in the pipeline, down from 90 percent in last year’s survey, EY said in the China portion of its Global Capital Confidence Barometer report.

The report surveyed over 2,300 executives globally, with 154 from China.

China respondents planning M&A deals in the next 12 months fell to 43 percent from the national level of 56 percent.

Erica Su, managing partner of EY China’s transaction advisory services, said the M&A market has become more rational after authorities tightened inspections on cross-border M&A activities and outbound investment late last year.

The government restricted excessively large deals and projects irrelevant to a company’s core business to prevent risks amid a boom in overseas M&As and rapid capital outflow from China.

Still the survey found over a third of the respondents sought overseas acquisitions.

“After squeezing out irrational sentiment in the M&A market, the government still supports Chinese companies to expand overseas,” Su said.


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