China’s open borders and push to stoke economy may revive dealmaking, advisers say

SYDNEY/SINGAPORE, Jan 26 (Reuters) – China’s reopened borders and a renewed focus on boosting a slowing economy have brightened the deal outlook, with bankers showing interest in mergers, acquisitions and fundraising involving the world’s second-largest economy.

The prospect of a revival in deals comes as Chinese policymakers try to restore private sector confidence and growth that has been battered by the Covid-19 pandemic and a sweeping regulatory crackdown.

Although consumer, retail and travel-related firms are expected to bounce back after nearly three years of lockdowns, advisers say sectors related to strengthening China’s economic prospects will be at the center of deals this year.

“We see a focus on strategic areas, hardcore industrial technology, automation, semiconductor-related outbound activities,” said Mark Webster, partner and head of Singapore-based BDA Partners, an Asia-focused investment banking consultancy.

“Healthcare opportunities are proving to be of interest both domestically and abroad, including in Southeast Asia,” he added. “Geographically, Indonesia in particular is attracting a lot of attention.”

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Australia has also appeared on China’s radar in hopes of a diplomatic settlement between the two countries. In one such deal, a joint venture between Tianqi Lithium ( 002466.SZ ) and IGO ( IGO.AX ) is bidding for lithium mining essential metals.

Outbound M&A involving companies in China halved last year to the lowest point since 2006, Refinitiv data showed, bringing total Chinese company-led deals to the lowest point in nine years.

During the same period, the capital market turnover of Chinese companies decreased by 44 percent, according to Refinit’s data. That slowdown has reduced fees earned by Wall Street banks and forced some of them to cut work, mainly tied to Chinese deals, in the past few months.

“We’ve had a lot of requests for proposals from companies in the past two to three weeks,” said Li He, capital markets partner at law firm Davis Polk, who traveled to Beijing to meet with clients the day after China’s border reopened in January. 8.

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“It’s not just because of travel but because people think reopening is good for the economy, good for capital markets and good for contract execution,” he said.

Foreign Chinese IPOs that had stalled over the past 18 months were mistakenly reopened under regulatory scrutiny as proposed rule changes and the tech sector grappled with a range of new rules.

Until the border reopened, travel from Hong Kong to mainland China was strictly restricted for about three years — a sharp change for consultants for whom weekly trips to China were common.

According to Bagrin Angelov, head of China cross-border M&A at Chinese investment bank CICC, open borders could increase deals involving private equity funds after 2023.

Chinese private equity activity was worth $24.1 billion in 2022, down from $57.8 billion a year earlier, Pitchbook data showed.

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“Six months or a year before the deal, private equity firms will start meeting potential buyers to try to warm up interest and understand who might be interested,” said the Beijing-based Angelov.

“Certainty is very important to them, and they really need to meet buyers very quickly,” he continued. “Due to the opening, we expect an increase in foreign disposals of private equity for Chinese buyers.”

Reporting by Scott Murdoch in Sydney, Yantoltra Ngui in Singapore and Roxanne Liu in Beijing. Edited by Gerry Doyle

Our Standards: Thomson Reuters Trust Principles.

Scott Murdoch

Thomson Reuters

Scott Murdoch was a journalist in Australia for Thomson Reuters and News Corp for more than two decades. He has specialized in financial journalism for most of his career and has covered equity and debt capital markets across M&A in Asia and Australia. He lives in Sydney.


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