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Welcome to S-RM’s August Regional Bulletin. To mark the expansion of our Hong Kong office, this edition includes two feature articles, rather than the usual one, as well as the customary News in Brief section.
Our first article examines trends in outbound investment by Chinese companies since the end of 2016. Outbound foreign direct investment (‘FDI’) from China peaked in 2016 at USD 245 billion; but in 2017 deal volumes have dropped. We argue that the key drivers of this decrease have been political, as the Chinese government seeks to ensure that overseas investments fit within a transforming policy framework. Investments that do not align with the One Belt One Road initiative, or that are considered to be in ‘non-core’ sectors, have been labelled “irrational”. A tightening regulatory framework has led to greater scrutiny by China’s regulators of overseas investments, with several acquisitive private entities becoming the subjects of unwanted attention or, in some cases, enforcement action. Additionally, we highlight how acquisitions by Chinese companies in One Belt One Road jurisdictions have actually increased, in contrast to overall trends in outbound investment.
In the second article, we analyse how Hong Kong and Singapore, historically two of the world’s most financially opaque jurisdictions, are succumbing to international pressure to increase transparency. The financial crisis of 2008 triggered a global movement to tighten financial regulation; however, a further watershed for the Asia Pacific region arrived in 2015, when the Panama Papers and the 1MDB scandal placed the spotlight on Hong Kong and Singapore. Since then, the two rival financial hubs have accelerated efforts to improve their compliance regimes. In the article, we assess progress in both jurisdictions and explore the implications.
As usual, the News In Brief section covers some of the significant developments across the region in the last three months. In this edition, amongst other developments, we have included coverage of: the elevated tensions between the United States of America and North Korea; the resignation of Nawaz Sharif as prime minister of Pakistan, following a Supreme Court decision; and increasing assertiveness by China in extraditing overseas fraud suspects.
As ever, please do contact us if you have any questions or comments.
Director, S-RM Asia Pacific: