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Belt and Road Investment Increases Even as China Cuts Down on Financial Outflow

Aug. 17, 2017 (EIRNS)—While the People’s Bank of China has begun to clamp down on the outflow of capital, with the volume of mergers and acquisitions down 42% this year, there has been an increase in investment in Belt and Road countries. China has made a concerted effort to clamp down on debt-driven acquisitions abroad, ordering a group of big companies like the HNA Group, Dalian Wanda, and the Fosun Group to assess their exposure to ensure financial stability, much of which has been speculative investment in movie theaters and European football clubs. And yet Chinese acquisitions in the 68 countries officially linked to President Xi Jinping’s signature foreign policy totaled $33 billion as of Aug. 14, surpassing the $31 billion tally for all of 2016, according to Thomson Reuters data.

People are thinking in a long-term approach when making investments along Belt and Road countries, said Hilary Lau, a corporate and commercial lawyer and partner in the law firm Herbert Smith Freehills. The acquisitions are also policy driven. There are funds allocated by Chinese banks and state funds for Belt and Road deals, he said. The number of Chinese deals targeting Belt and Road countries totaled 109 this year, compared to 175 in the whole of last year and 134 in 2015, the Thomson Reuters data showed. The State Administration of Foreign Exchange, China’s foreign exchange regulator, said this month that domestic companies would still be encouraged to participate in Belt and Road activities.