Perceptions of China’s Outbound M&A

by Kaiwen Zhong, BA ’15

Chinese companies’ acquisitive streak in the US is often called a buying “spree” and is frequently compared to Japan’s heightened real estate purchase activities in the United States in the 1980s. As the number of large deals from China to the US increased consistently over the last five years, media attention has turned from initial hostility and trepidation to more unbiased analysis to the increasing size and scope of China’s M&A.

Some articles focus on hostile voices towards China’s outbound M&A deals in the United States. CNN Money reported on a backlash against China’s acquisitions by the US-China Economic and Security Commission as it “wants the United States to block Chinese state-owned companies from carrying out takeovers in the country” and even characterizes the trend as a “threat to national security.”[i]  Leading newspapers such as the New York Times have focused their coverage on the size of the takeovers while the U.S. Congress has expressed concerns over China’s deals in the entertainment industry. U.S. Congressmen have gone so far as to suggest that the definition of national security be broadened to “address concerns about propaganda and control of the media and ‘soft power’ institutions.”[ii]

The Chinese government’s recent change of attitude towards the surge of outbound M&As is also closely followed by the U.S. media, especially the negative reactions by the Chinese government in the last month of 2016. For instance, the Financial Times reports that the “biggest hurdles for Chinese groups seeking to buy businesses overseas” is the Chinese government, claiming that the State Administration for Foreign Exchange will “crack down on acquisitions it deems speculative in nature” due to fear of the outbound M&As being used to “move capital offshore.”[iii]  Others focus on the key drivers of the ever increasing volume of China’s M&As in the developed world. In 2016, the learned experience of the dealmakers in working with local government was one of the most notable new drivers of growth. For example, Bloomberg summarized the “new playbook” as “long courtship, job guarantees” to deal with the government’s knee-jerk opposition to Chinese deals. [iv]

The conversation has come a long way since 2013, when China’s Shuanghui bought US pork producer Smithfield. In late 2013, New York Post used the title “Why are We Letting China Buy American Companies?” to criticize the perceived weakness of the U.S. government in numerous Chinese acquisitions , which according to them “damage the American economy and cost jobs in the long run.”[v]  While many media outlets still use titles such as “The 11 Top U.S. companies Targeted by China”[vi]  to portray Chinese companies as a force disrupting America’s companies, most focus on the deal backgrounds, drivers, and facts, with analysis [vii] beyond the widespread tone of fear in 2013 and prior.

While there is no shortage of studies on the performance of cross-border M&As from China or on media coverage and its relationship to financial and business performances, there are studies on media influence and correlations specific to China’s cross-border M&As in the United States. For instance, the report “Local Media Coverage and Its Relationship with China’s Outbound Mergers and Acquisition in Developed Countries” [viii]  explores how Chinese M&As in the United States consistently receive higher media attention than other BRICS countries and other major US M&A partners such as Mexico, the United Kingdom, and Japan. The research attempts to answer these two questions:

1. Is the magnitude of media coverage and the patterns of coverage over time correlated with the outcome of the deals, such as target companies’ stock returns?
2. Is the magnitude of media coverage the result of the deal features, such as industry, deal size, and company size?

​After studying deals where targets are publicly traded companies in Canada, the United Kingdom, and the United States, the project concluded that there is a negative correlation between media attention given to deals prior to the deal announcement and the target’s one-week stock performance. The target stock prices relate negatively to both the short and long- run media coverage, meaning if there is a high volume of media articles covering the two companies in a deal, the one-week stock price of the targets is likely to be lower.

Additionally, the research shows that the magnitude of media coverage is related to specific deal features. For example, if the Chinese acquirer is a publicly traded company, and if the two companies involved in the deals are both from the same industry, the deal is expected to attract more media attention. There is a statistically significant positive correlation between the targets’ share prices and the deal characteristics, such as acquirers’ public status, percentage sought by the acquirer, transaction volume, and industry similarity.

In 2016, the volume of China’s outbound mergers and acquisitions continued to hit record highs, with 372 deals worth US$ 206.6bn, the highest annual outbound M&A value on record, up 188.7% compared to 2015’s previous high. [ix]  The surge in Chinese investment is coupled by a continued shift in industry focus from the energy and resources sector to the manufacturing, technology, and consumer sectors. [x]  Meanwhile, more deals are done in western developed countries, as compared to China’s previous focus in Africa or Southeast Asia. As a result, local media coverage in the developed countries, including in the United States, has become increasingly sensitive to the influx of Chinese capital. China’s acquisition streak is thus likely to continue to make headlines on both a macroeconomic and deal level.

[i] Pham, S. (2016, November 17). U.S. panel wants to ban China from buying American firms. CNN Money.

[ii] Wong, E. (2016, September 30). Chinese Purchases of U.S. Companies Have Some in Congress Raising Eyebrows. The New York Times.

[iii] Wildau, G., Weinland, D., & Mitchell, T. (2016, November 29). China to clamp down on outbound M&A in war on capital flight. Financial Times. Retrieved from

[iv] Campbell, M., Browning, J., & Kirchfeld, A. (2016, October 24). How China’s Dealmakers Pulled Off a $207 Billion Global Spree. Bloomberg.

[v] Francis, D. (2013, December 15). Why are we letting China buy American companies? New York Post

[vi] Krantz, M. (2016, March 18). The 11 top U.S. companies targeted by China. USA Today

[vii] China Deal Watch. (2017). Bloomberg.

[viii] Zhong, K. (2015, May). Local Media Coverage and Its Relationship with China’s Outbound Mergers and Acquisition in Developed Countries: Evidence from Canada, the United Kingdom, and the United States. Cornell University.

[ix] MergerMarket. (2017). Global and regional M&A: Q1-Q4 2016 (p. 44).

[x] J.P.Morgan. (2017). China’s Increasing Outbound M&A: Key drivers behind the trend.