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在线翻译:
szdaily -> Business
Regulators to crack down further on overseas deals
    2017-August-7  08:53    Shenzhen Daily

CHINA plans to further tighten the screws on overseas acquisitions by Chinese companies and borrowing to fund those transactions, and has started closely scrutinizing the commercial aspects of the deals, sources familiar with the move said.

The National Development and Reform Commission (NDRC), and the Ministry of Commerce (MOFCOM) are now reviewing deal agreements in minute detail, said the sources, who work with various regulatory bodies and companies on their acquisition plans.

The two bodies are asking companies looking to buy assets overseas to justify terms, including target valuations, deal premiums and financing arrangements, the sources said.

This was particularly the case with companies not seen by the government as “strategic,” the sources said.

The tightened measures have been issued as informal guidance by regulators and have not been made official yet, said the sources.

The tightening of regulatory oversight for outbound purchases comes as the government is cracking down on some large domestic conglomerates for their debt-fueled acquisitions abroad of assets ranging from hotels to movie studios.

The regulatory measures, if in place for an extended period, could deter some companies from making overseas acquisitions, and could also weigh on outbound deal volumes in China.

China’s outbound merger and acquisition volumes nearly halved in the first six months of this year to US$64.2 billion following a crackdown on capital outflows, after companies spent a record US$221 billion on assets overseas in 2016, according to Thomson Reuters data.

On top of tightened scrutiny of deal terms, the country’s foreign exchange and banking regulators are also looking to step up their monitoring of loans made by the overseas branches of Chinese banks, the sources said.

Those two regulators — the State Administration of Foreign Exchange (SAFE) and the China Banking Regulatory Commission (CBRC) — also plan to make it tougher for companies to borrow overseas by pledging some assets in China, the sources said.

Borrowing funds from foreign banks and overseas branches of Chinese banks by pledging real estate and other assets on the mainland with local banks has been a common practice for some companies looking to fund foreign acquisitions.

But some industry officials have questioned the quality of those pledged assets, and whether the lenders would be able to raise money against those in case borrowers defaulted on their repayment obligations. (SD-Agencies)

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