Analyzing China Inc's M&A trends and future scenarios

DEREK SCISSORS of the Heritage Foundation analyzes China Inc.'s  global investments since 2005 across countries, sectors and investors quantifying it at $224 bn in successful investments and $140 bn in unsuccessful investments. In his analysis, "China Global Investment Tracker: 2011", Australia, U.S., Brazil, Canada and Iran, were the most popular destinations and energy, metals and finance accounted for over 80% of all investments. CNPC, Sinopec, CIC, Chalco and CNOOC were the top firms investing $120 bn or over 50% of Chinese cross-border mergers and acquisitions. 

CHARLES WOLF of the Hoover Institution states that China's appetite for acquisitions of foreign companies could quadruple from current levels of 6.6% share of global cross-border M & A by 2020 on the back of its growing trade surplus, diversification away from US debt and its appetite for natural resources, emerging technologies, and financial know-how.

In his Wall Street journal op-ed, "China's Next Buying Spree: Foreign Companies", he states that this would make China a more active and influential player in global mergers and acquisitions markets enhancing its integration into the world economy and could also lead to an improvement in China's domestic corporate governance practices. He states that there could also be a rise in tensions both within host countries and China on differential barriers to cross-border investments.

Channeling foreign capital inflows

ESWAR PRASAD, fellow at Brookings Institution and Professor of Trade Policy at Cornell University analyzes India’s record current account deficit and asserts that policymakers must look for more ways to channel capital inflows into productive investments, which would help the country attain the potential benefits of foreign capital with less exposure to the risks of volatile short-term flow. In an op-ed for the Wall Street journal, "How India Can Cope With Plenty", he recommends multiple measures that policymakers could implement such as: opening up FDI to various sectors, reforming corporate bond markets, tackling corruption and red-tape, reining in government expenditure, and switching from inefficient subsidies to direct cash transfers, arguing that the current period of high growth and large capital inflows could be the best ever opportunity for India to implement those reforms.