Fast-tracked regulatory changes have preceded new trends for Chinese investment. Richard Li unearths gold for those wanting to stay ahead in the challenging sectors of mining, energy and natural resources
If you have been following past deals to determine where China’s pot of gold for mining and energy commodities is being spent, think again.
As nations vie for the massive capital injections China can provide their often flagging economies through mining, energy and natural resources projects to feed ever hungry Chinese industry, the ground can move quickly.
And while some savvy nations are liberalising and easing regulation to woo that pot of gold, others are finding themselves caught up in tangled reforms or a lack of political will to ensure continued favour.
Experts warn mainstay mining colossuses like Australia may be falling behind. Brazil, once brimming with new deals, is sliding too, if you discount a couple of larger deals that have had the effect of propping up an otherwise negative outlook.
In Africa and central Asia, resource-rich nations are beckoning Chinese investors willing to move into riskier environments where the rewards are greater but often blurry regulation can help or hinder at a government’s whim. And in Canada, opportunities abound under a more liberal regulatory structure deigned to lure big-ticket investment.
In the first quarter of this year, the resources and energy sector accounted for 92% of all Chinese outbound M&A deals, according to the A CAPITAL Dragon Index, an index published by A CAPITAL’s research team to track Chinese outbound investments globally.
International policy and the regulatory landscape for the sector has shifted more quickly than usual in the past year, and this has caused the uncertainty in China’s investment destinations.
According to the World Investment Report 2012, issued by the United Nations Conference on Trade and Development (UNCTAD), the past year saw a continuation of new regulatory policies on foreign direct investment (FDI), motivated by security concerns, sovereign desires to control strategic industries, etc. According to the report, state regulation was especially manifest in two areas: (i) an adjustment of entry policies with regard to inward FDI; and (ii) more regulatory policies in extractive industries.
In central Asia, for example, Kazakhstan and Mongolia have strengthened state influence in their mining and natural resources sectors. In South America, Argentina and Brazil have imposed restrictions on land ownership by foreigners.