Here be dragons

Chinese investors are venturing into more diversified sectors around the world, but lawyers urge them to beware the political and post-sale risks before entering unchartered waters, writes Vanessa Ip

If there are fears of an economic downturn in China, no-one has told its state and private investors keen for a slice of foreign opportunity as they open sail for the world’s four corners.

And they may be right. Although it is widely speculated that China’s “boom” is over, cross-border activity increased by 18.2% to US$72.2 billion in the nine months to 30 September, with outward foreign direct investment expected to rise to over US$5 trillion by 2020 from US$311 billion. But in waters still relatively uncharted by outbound investors, the risks can be high. Political considerations in an increasingly polarised world can sink the keenest entrepreneur. And a lack of expertise beyond simple acquisitions just may be the sea monster that many Chinese companies never spy on the horizon before it’s too late.

For those who avoid shipwreck, opportunities beckon. While most of China’s outbound M&A activity will continue to centre on the energy sector, there is growing interest in diversification and non-traditional sectors such as financial services, consumer goods, infrastructure and agricultural products are driving the Chinese outbound M&A market.