Amid Trump's trade war, Chinese outbound mergers & acquisitions to rise, say analysts

Chinese outbound mergers and acquisition (M&A) activity is set to rise under the incoming Trump administration in the United States, according to analysts.

US President-elect Trump has indicated that he would ramp up outgoing President Joe Biden’s hawkish stance on China. He has said that he could impose blanket tariff of 60 per cent or higher on all Chinese imports as against targeted tariffs currently in place.

Trump is also expected to continue the scrutiny of US investments going to China. Such an approach is expected to change the M&A scenario in China.

Analysts say that while China’s outbound M&A activity outside of the United States is expected to rise, the inbound M&A outlook, particularly regarding US investments, is set to get gloomier.

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At a time when China is struggling to boost economic growth, there is a real chance of Trump’s tariffs derailing the Chinese economy. An analysis by investment and financial services firm UBS says that China could lose 2.5 per cent of GDP if the United States imposes 60 per cent tariffs on all Chinese imports.

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To offset the loss of business in the United States, Chinese companies are expected to reduce reliance on US markets and increase mergers and acquisitions in other markets. Trump’s tariffs-driven trade war would be the main driver.

“More tariffs may mean that the globalisation of Chinese companies is going to get faster. Chinese companies will consider moving faster to look for alternatives in shipping or selling to the US. That is quite loud and clear,” said Stanley Lah, Asia-Pacific and China M&A head at Deloitte, to South China Morning Post.

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Instead of creating new business in newer markets with new sales office or manufacturing facilities, mergers and acquisitions “should emerge as a speedier solution to satisfy Chinese companies’ objective of being more effective in global markets”, said Lah to SCMP.

Chinese M&A activity has been on a decline this year. As per London Stock Exchange’s data cited by the newspaper, Chinese outbound M&A deals have seen a year-on-year declined of 16.5 per cent so far this year whereas such deals saw a year-on-year rise of 59 per cent last year.

Such a decline is partially because of the worldwide trend of a generally lower-than-before M&A environment amid high geopolitical tensions, uncertainties around policy and regulations increasingly being shaped by politics, and high interest rates.

Federico Bazzoni, the CEO of investment banking at Vantage Capital Markets, told SCMP that he expects Chinese M&A activity to pick up pace in the second half of 2025 once there is clarity in the stance of the Trump administration.

Bazzoni said that the uptick could be notable in sectors blessed by the Chinese regime, such as manufacturing, technology, and renewable energy.

“From my conversations with some of the state-owned enterprises, some of the corporates, they are waiting to see what’s happening. They are not engaging with new targets unless there will be some clarity from the [Chinese] government and from the Trump administration,” said Bazzoni.