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China plans tougher clampdown on firms' overseas deals

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China plans tougher clampdown on firms' overseas deals

China plans to tighten the regulation of Chinese firms' overseas acquisitions and borrowing to fund such deals, Reuters reported Aug. 4, citing three sources who work with regulatory bodies and companies on their acquisition plans.

The sources said the National Development and Reform Commission and the Ministry of Commerce have started a closer review of outbound deals, asking companies to justify terms, including target valuations, deal premiums and financing arrangements.

The State Administration of Foreign Exchange and the China Banking Regulatory Commission also plan to make it harder for Chinese firms to borrow funds from foreign banks and overseas branches of Chinese banks by pledging assets in the mainland, the sources said.

SAFE told Reuters that it would urge local companies capable of investing abroad to pursue "authentic and legitimate" foreign deals. It would also encourage local banks to be prudent when offering financing services.

Reuters reported earlier this week that China's finance ministry issued guidelines on overseas investment of state-owned companies, amid concerns on the profitability of their rising purchases abroad.