Chief Economist at Hong Kong-listed Zhongyuan Bank, specifies the new rules are about creating a clear operating framework for businesses seeking overseas expansion, rather than ‘simply blocking some deals’. A fundamental part of the new rules structure was retargeting deals that were once deemed ‘irrational’, after outbound investment in 2016 reached its pinnacle at US$170 billion, causing a depreciation in the value of currency (the lowest levels since 2008) and huge capital outflows, hinting at instability.
Uncontrollable outbound investments were considered a ‘national security matter’ by President Xi Jinping, and close examination of the country’s top private sectors occurred. Wanda Group, China’s largest commercial property company, sought a buyer for its flagship property assets in London, valued at US$5 billion.
Statistics from the commerce ministry specify China’s outbound investment in the first 10 months of 2017 fell 40.9% from the same period of 2016. In November alone, the total rose 34.9%, presenting a year-on-year increase of 2017. This was due to the recommencement of ‘normal’ deals after a blanket suspension.
State approval from China will no longer be a necessity for any overseas Chinese investment in UK, relating to infrastructure or development, even if the funds are currently in China and not yet distributed overseas – reinstating access for Chinese investors to enter the UK property market.