Jin Chen, CEO at SINO-CEEF EUROPE; Yao Sun, Investor Relations Manager at Haier Smart Europe, Mei Wu, Managing Director at Joyson Europe and Hui Zhang, Managing Director at Nio; together with panel head Ding Han, Foreign Counsel at McDermott Will & Emery discussed recent developments in Cross Border M&A from and into Asia.
The panelists outlined their analysis of the current situation regarding four key questions. First, they evaluated the tightening AWG (foreign trade law) and upcoming EU regulation with respect to M&A with Asia. Then, they discussed the clash of cultures that impact post-merger integration. They further shared their thoughts about the internal decision making within Chinese enterprises regarding investment-choices and gave reason and outline to the Chinese outbound investment in Germany.
The panelists started by each giving their empirical opinion about Chinese outbound investments in Europe and in particular in Germany, especially considering the current market frame of trade wars, changes in regulations and the tightening of trade laws, on both sides. While the Chinese outbound investment has dropped significantly in recent years, it was, however, emphasized that there has been a 2.7% increase in investment in recent weeks and that the downward trend appears to be turning. The panel continued to discuss that among all investments into Europe only 3% comes from China including Hong Kong and Macau. However, an increase in consumer sector investments was noted in the context of a stronger focus of Asian investments in Europe.
To comment on the reasoning behind the Chinese decision making regarding collective choices of investment towards Europe and its framework of regulations and complications, the Chinese government was compared with a “helicopter parent” that intends to make investments as safe and sound as possible for Chinese businesses even if that means limiting good investment opportunities.
The panel then discussed the status and changes within the automotive sector. It was explained how people and businesses got used to consistant substantial growth since the great recession in the automotive market, but had to cope with severe decreases in the past year. A prognosis of stagnation rather than decline in the next year is seen stated despite the macroeconomic decrease in the automotive industry and the several reasons for pressure on the Chinese car industry.
The panelists collectively agreed, however, on the newfound focus of Asian investment and M&A towards the German market, mainly due to the US-Chinese trade tensions. In their opinion, this investment change will continue to grow even though Germany has in fact tightened its rules what led to many discussions in China.
The panel continued to discuss the reasoning behind the current general Chinese investment decisions and it was explained that many Chinese investors are looking for critical economic structure when considering business investments. Chinese investors are, especially now, focussing strategic investments and concentrating on transaction certainty.
Considering the frequent conflicts and problems with post-merger integration, it was reinforced that nationality is and should not be a necessary consideration when talking about investment options and opportunities.
The panel concluded with a reinforced statement that the Chinese decision of investment towards Germany is solely strategically based and offers many opportunities for business and investment that have not yet been explored, but will most definitely in the upcoming years.
McDermott Will & Emery