China’s M&A activity rebounds despite impact of Covid-19 pandemic
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China’s M&A activity rebounds despite impact of Covid-19 pandemic – leading macroeconomic influencers

06 May 2021 (Last Updated May 6th, 2021 08:07)

The strict restrictions and containment measures imposed due to the Covid-19 pandemic impacted merger and acquisition (M&A) activity in China in early 2020 but began to recover by the end of 2020.

China’s M&A activity rebounds despite impact of Covid-19 pandemic – leading macroeconomic influencers
Credit: metamorworks/Shutterstock.com.

Alicia Garcia Herrero

Alicia Garcia Herrero, Chief Economist for Asia Pacific at Natixis, shared an article on how China’s M&A activity has rebounded strongly towards the end of 2020. The Covid-19 pandemic and related restrictions impacted the country’s outbound M&A activity in early 2020, showing a decline by more than half in value compared to 2019. The decline was worse than the global decline in M&A activity of 10% in 2020, according to the UNCTAD Investment Trends Monitor.

M&A activity in China, however, rebounded towards the end of 2020 with specific focus on European industrial companies. The rebound was mainly driven by two deals including Tencent’s acquisition of a 10% stake in Universal Music and Shanghai RAAS’s acquisition of 45% of Grifols Diagnostic Solutions.

China’s interest in exploring global opportunities and its search for technology upgrades are primary drivers for rise in M&A activity.

China’s M&A activity may not return to the record levels witnessed in 2016-2017 but may return to 2019-2020 levels in 2021 and companies in the European Union are expected to remain the country’s main targets.

Roger E. A. Farmer

Roger E. A. Farmer, professor of economics at Warwick University, shared an article on how the combination of massive stimulus package and poor monetary and fiscal policies will lead to inflation and eventual recession in the US.

The increased federal spending has created a US trade deficit in goods of more than $1tn a year at an annualised rate, as of February 2021. Further, US input prices increased at the fastest rate since 1973, while the Producer Price Index for final demand surged by 11% during the first quarter.

The article noted that although the stimulus package provided by the government and purchase of Treasury securities by the Federal Reserve has helped the economy survive amid the devastating impact of the pandemic, it has also weakened the future effectiveness of the dollar lending system.

As the country continues to issue more money to stabilise its economy, the status of the US dollar as an international payment system could be damaged in the future.

James Picerno

James Picerno, editor of US Business Cycle Risk Report, shared new survey data for the JP Morgan Composite PMI, which indicates towards accelerated global economic growth in April to 11-year highs. The growth was mainly led by expansion of the US and UK economies despite weak growth in Japan.

The financial services sector recorded the strongest performance, followed by investment goods and business services. Consumer and intermediate goods also registered growth although the consumer services sector registered decline for the 15th successive month.

Global employment levels also increased in eight months with staffing levels rising at the fastest rate among manufacturers and service providers. The level of incoming new business increased for the tenth straight month with investment goods remaining at the top. Input costs also increased at the fastest rate since mid-2008, forcing companies to increase output charges leading to surge in selling prices.