Hazy maze

13 December 2016 By Rachel Morarjee

China has floated plans to make it harder to move money abroad, and to stop leftfield takeovers, but has not announced any concrete rules. Never mind: uncertainty is always a deal killer. Sellers are already wary, and will demand larger premiums and upfront payments.

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Subjects

Investment Banking

Regions

Context News

China has tightened capital controls in recent weeks, with leaked documents circulating on social media indicating there would be tighter approvals for both outbound takeovers worth more than $1 billion and for outbound foreign exchange transfers by banks. No official rules have been published and documents purporting to be official were later taken down by censors.

Reuters reported on Nov. 29 that China's State Administration of Foreign Exchange would vet all overseas transfers of over $5 million. Previously, only transfers of $50 million needed to be reported to SAFE, sources with knowledge of the new rules told Reuters. Meanwhile, Chinese banks have been given unwritten guidance that they should also vet transactions over $5 million, corporate treasurers told Breakingviews.

Western media have also reported China will impose tighter restrictions on overseas acquisitions. In an article published on Nov. 26, the Wall Street Journal said deals above $10 billion would face "particular scrutiny", as would $1 billion-plus investments outside a company's core industry.

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