Skip to content

China M&A: What’s behind the fall?

Elaine Tan
Elaine Tan
Senior Analyst, Deals Intelligence

China M&A activity slowed to the weakest level since 2014 in H1, with Belt & Road deals particularly impacted amid the continuing U.S.-Sino trade war. Refinitiv’s Elaine Tan, Senior Analyst, Deals Intelligence, examines China’s M&A, debt and equity capital markets.

  1. China M&A activity in H1 fell 38 percent to just under US$200 billion, with outbound deals down 73 percent to a seven-year low.
  2. Companies raised $66 billion in equity capital, a decline of 14 percent, while proceeds from IPOs amounted to $19.5 billion, a drop of nearly a third.
  3. Chinese government bonds dominated the debt capital market in the period, with $394 million raised, representing 46 percent of the Chinese debt markets.

Chinese overseas M&A activity continued to revert to the ‘old normal’ in the first half of 2019, following a ‘super peak’ in 2016, as growing trade tensions precipitate a further decoupling of the U.S. from the world’s second largest economy.

Total China M&A fell 38 percent in the period, at just shy of US$200 billion, representing the slowest period since 2014.

China mergers and acquisitions

China M&A in numbers

Domestic deals were subdued while the Chinese outbound story continued its freefall, down 73 percent year-on-year to a seven-year low. Interest in Belt & Road nations suffered most, with a 90 percent fall, to represent just one-fifth of Chinese overseas acquisitions.

China outbound acquisitions

Meanwhile, overseas interest in Chinese companies fell 42 percent compared to the same period last year, to hit $19 billion. As a result, advisory fees for completed deals ended the half at $433 million, the lowest since the first half of 2015.

China inbound M&A. China M&A and the trade war impactDownload our H1 China M&A quarterly review

Chinese companies raised $66 billion in equity capital in the period, a decline of 14 percent, while proceeds from IPOs amounted to $19.5 billion, a drop of nearly a third.

The one bright spot was in convertible offerings, which enjoyed a record first half, raising $31 billion, an increase of 110 percent, year-on-year. CITIC leads the ranking in Chinese ECM underwriting, with an 11 percent share, followed by Goldman Sachs at nine percent.

China equity capital markets. China M&A and the trade war impact

Debt capital markets

Debt capital markets (DCM) were a different story, driven by sovereign and corporate debt issuance.

Primary bond offerings increased by almost half (48 percent) to $853 million, the highest level since 2016. Corporate bonds reached all-time highs in the period, with investment grade up 37 percent to raise $212 million and high yield soaring 172 percent, albeit from a low base, to reach $20 million.

However, it was Chinese government bonds that dominated DCM in the period, with $394 million raised, representing 46 percent of the Chinese debt markets, and also making China the most active government issuer, representing more than one-third of sovereign debt issuance globally.

Chinese banks command much of the China bonds underwriting market. Bank of China takes a nine percent share, with ICBC and China Construction Bank in second and third place respectively.

China debt capital markets

Download our China Equity Capital Markets Review

Overall, investment banking fees in China during the period increased by a relatively modest 7.5 percent, to $6.7 billion, propped up by a 48 percent surge in DCM fees, which reached $4.1 billion, the highest first half period ever since records began in 2000.

Download our H1 quarterly investment banking reports for a full view of M&A and capital markets in 2019

The immense scale of the Belt and Road Initiative presents a unique set of opportunities — and risks — for global financial professionals, investors and asset managers.

Unlock BRI investment opportunities using Eikon

Watch: China’s Belt and Road Initiative (BRI): Project industry and funding source data

Eikon BRI Connect includes:

  • A database of BRI related projects, updated in real-time
  • Unparalleled coverage of financing deals and primary capital markets
  • Insight into BRI investment opportunities
  • Secure, accurate, up-to-date country risk ratings
  • Details on over 3500 BRI related organizations

Access the world’s most comprehensive database of BRI-related projects