Chinese companies are increasingly looking at opportunities in Malaysia, with mergers and acquisitions (M & A) by Chinese private investors to become the main drivers of outward direct investment in China, said HSBC Bank Malaysia Bhd.
Mergers and acquisitions have become the fastest way for Chinese companies to tap foreign markets and move further up the value chain, the bank said.
Depreciation of foreign currencies against the yuan, he said, provided a favorable environment for M & A activities in China.
He added that the increase in disposable income among the 1.4 billion Chinese consumers was also fueling interest in acquisitions in the leisure and consumer goods sectors.
"This has been reflected in the Chinese investment in Malaysia. So far this year, mergers and acquisitions of Chinese in Malaysia have been the most active in history, both in terms of volume and number of large deals.
"Real estate, consumer products and retail were the most active sectors," he said in a statement Thursday.
In the first seven months of this year, the total value of Chinese M & A in Malaysia stood at US $ 830mil (RM3.35bil), nearly four times the figure for all of 2014.
The deals include the purchase signal Southern Crest Development Sdn Bhd, Greenland Holding Group at US $ 658mil (RM2.66bil), the purchase of Pearl Longcheer Holdings Sdn Bhd Discovery Development in US $ 89mil (RM359.7mil) and Parkson Retail purchase YeeHaw Best Practices Group Sdn Bhd on dining and lodging industry.
The bank said several factors were driving the growth of China's outbound direct investment (ODI).
"First, in our opinion, ODI China to keep growing by 20% a year, with China overtaking the US as the world's largest outbound direct investor in the coming years.
"This year, the pace of investment will accelerate, driven by large infrastructure investments in Asia and Europe are expected in the 'One Belt, One Way" initiative, "he said.
He added that Chinese companies were turning to agriculture, manufacturing technologies high-end consumer goods, real estate, services and brands.
Another important trend is that private investors are becoming the main driving force of the ODI.
"The privately owned companies are investing in more industrial sectors such as value-added agro-technology, high quality manufacturing and real estate in most countries and regions.
"They are looking for the intellectual property and brands to deploy in the Chinese market," he said.
Increased Chinese ODI is driven by a strong central government stimulus to national to invest abroad in a bid to boost their international competitiveness companies.
ODI from China grew by 19% year on average between 2009 and 2014.
In comparison, foreign direct investment (FDI) in China grew on average by 5% in annual terms during the same period.
Last year, China's ODI reached US $ 116bil (RM469bil), almost the same as the total foreign direct investment of US $ 120bil (RM485bil).
"As Chinese companies accelerate the pace of overseas expansion, the number of renminbi (yuan) denominated in deals is likely to increase.
"Overall, the overseas investment of Chinese enterprises is supported by the central government and is helping to encourage the participation of China in the world economy.
"This is a new era of global cooperation, and history is a clear win-win," he said.
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