BEIJING -- China moved Friday to curb investment overseas by its companies and conglomerates, issuing its strongest signal yet that it wants to rein in runaway debt that could pose a threat to the country's slowing economy.
The communist government has stepped up its efforts in recent months to restrict some of its most acquisitive companies from buying overseas assets, worried that a series of purchases by China's conglomerates around the world has been driven by excessive borrowing.
In the latest move, a statement published by China's Cabinet, the State Council, said authorities would punish companies for violating foreign investment rules and establish a blacklist of businesses that did so. The statement was attributed to the National Development and Reform Commission, the commerce ministry, the foreign ministry and the central bank.
The statement pointed to acquisitions in sectors ranging from entertainment and sports clubs to hotels, but it was unclear whether or how the government would block deals.
It repeated a warning issued in December that restrictions on overseas investments were being imposed because of "irrational" investment trends.
That statement said that the kinds of investments overseas it described were "not in accordance with macro-control policies." The government wants to "effectively guard against all sorts of risks," it said.
"It's the loudest yet of wake-up calls that the government holds the keys to the lockbox of the country's wealth, public and private," Peter Fuhrman, chairman of China First Capital, an investment bank, said in an emailed response to questions. "Bad [mergers and acquisitions are] all but criminalized."
A surge in overseas acquisitions by Chinese investors in recent years has ignited fears that soaring corporate debt levels could destabilize the country's economy, the world's second largest, and further weaken its currency.
Companies such as Anbang Insurance Group, Fosun International, the HNA Group and Dalian Wanda Group have capitalized on cheap loans provided by state banks to snap up trophy assets such as the Waldorf Astoria hotel in New York and AMC Theaters.
On Monday, a Chinese businessman, Gao Jisheng, bought an 80 percent stake in Southampton Football Club, a soccer team in the English Premier League, for about $271 million.
The State Council statement comes amid increased scrutiny of China's "gray rhinos" -- threats that are large and obvious but often neglected even so.
In recent months, the government has said it would increase scrutiny of companies' balance sheets, warning that some of the largest companies could pose a systemic risk to the economy.
Business on 08/19/2017