CHINA’s foreign acquisition frenzy is set to end with tighter capital controls and wary counter-parties putting the brakes on further deals.

Chinese deal-makers spent a record US$246 billion (RM1.13 trillion) in foreign acquisitions last year but in the first four months of 2017, cross-border purchases plunged 67%, reports Bloomberg today.

The figure, according to Bloomberg data, is the biggest drop for a comparable period since the depths of the global financial crisis in 2009. Last year, China came No. 2 behind the United States on the ranking of global acquirers.

There are few signs of a rebound as Chinese regulators make it difficult for acquirers to move money overseas to stem capital flight and stabilise the yuan. Foreign sellers are also creating more hurdles after getting spooked by a string of cancelled deals, it said.

The foreign targets are forcing Chinese buyers to pay large penalties if offers fall through, while others are shunning Chinese bids in favour of lower-priced offers from elsewhere.

Beijing, said the report, has imposed a plan to curb offshore acquisitions of US$1 billion or more in industries outside a buyer’s core business.

The development is likely to have an impact on the failed Bandar Malaysia deal. Last week, Putrajaya terminated a December 2015 deal between Iskandar Waterfront Holdings Sdn Bhd (IWH) and partner China Railway Engineering Corporation (CREC)’s joint venture to develop Bandar Malaysia.

The IWH-CREC consortium failed to pay the RM7.42 billion purchase for a 60% stake in Bandar Malaysia to owner, TRX City Sdn Bhd. The Wall Street Journal reported on May 3 that Beijing refused to authorise the investment.

Putrajaya is now seeking to ink a new deal with another Chinese group Dalian Wanda Group, owned by Wang Jianlin, to develop the huge tract of valuable land in the centre of Kuala Lumpur.

Najib Razak will be in Beijing tomorrow and the plan is for the prime minister and China’s President Xi Jinping to witness the signing of the deal said to be about US$8 billion. – May 11, 2017.