China hits pause button on US dealmaking

Chinese buyers keen to continue 2016’s rapid dealmaking under a Donald Trump presidency are being given one piece of advice: Wait and see.

Bankers and lawyers are already counseling some Chinese clients to hit the pause button until Trump clarifies his stance on cross-border deals for the US targets, according to three advisers to Chinese clients, who asked not to be identified because the discussions are private.

Acquisitive Chinese companies have led a blockbuster year of dealmaking in 2016, accounting for about $225 billion of overseas purchases this year, according to data compiled by Bloomberg.

That’s more than triple the level of the same period a year earlier — and the biggest chunk of the money has been spent in the US. If Trump follows through on his campaign rhetoric, however, their enthusiasm could be short-lived.

“There’s at least a short-term pause,” said Annabella Fu van Bijnen, a partner at law firm Linklaters in Hong Kong. “Given the way Trump has run his campaign there’s not a lot of policy clarity. Investors might be a bit more cautious given the protectionist sentiments that were expressed.”

One of the hallmarks of Trump’s presidential campaign was an insistence that China has taken advantage of the US on trade deals. The President-elect has pledged to label Beijing a currency manipulator.

He’s also vowed to lower corporate taxes in an effort to tempt companies to stay in, or return to, the US. Some of the biggest effects could be seen in the technology and entertainment industries, where Chinese buyers have been particularly active.

Just this month, billionaire Wang Jianlin’s Dalian Wanda Group agreed to pay $1 billion to acquire Dick Clark Productions, the television studio behind the Golden Globe awards and Miss America beauty pageant.

The deal followed Wanda’s $3.5 billion purchase earlier this year of Legendary Entertainment, the Hollywood production house that worked on the “Dark Knight” Batman trilogy.

Trump’s administration could also bring changes to the way that US regulators treat deals.

The Committee on Foreign Investment in the US (CFIUS), the body tasked with reviewing acquisitions of companies that could have implications for national security, is chaired by the Treasury Secretary.

Until that position is filled it’s unclear how CFIUS will judge Chinese interest in US targets. Advisers are pushing temporary caution.

“People are still in the process of working out what it means,” said Joseph Chow, who formerly led Moelis & Co’s China business and now runs CJC Partners, a financial advisory firm in Beijing. “He has some tough rhetoric but he’s a businessman.”