Tuesday, July 22, 2008
A short while ago I reported an interesting story about a foreign investment deal that ran into problems because the approval authorities thought the foreign acquirers were paying too much. It's not just a one-off or local problem, apparently. Here's a Dow Jones report about the same kind of thing going on in Shenzhen and Guangzhou. The first four paragraphs are below; please click on the link for the rest. Don't forget, you read it here first!
After years of cross-border mergers being delayed by authorities wary of foreign firms snapping up Chinese assets too cheaply, Beijing's preoccupation with hot money may be swinging the pendulum the other way.
Now some foreign investors are being told by China's currency regulator that they're paying too much for Chinese companies.
A spike in inward foreign direct investment this year - up 46% on year in the first half, compared with a 14% rise for all of 2007 - suggests potentially volatile speculative funds are flooding into China in the form of artificially high price tags on corporate investments.
That has prompted the State Administration of Foreign Exchange in recent months to question a number of deals where the agreed purchase price was higher than the value of the assets indicated by an independent appraisal.