Why China Is Scrutinizing Its Biggest Dealmakers: QuickTake Q&A

China Inc. went on an unprecedented shopping spree in 2016, buying up $245 billion of overseas companies in a binge that was spearheaded by giant private conglomerates. But many of those same companies have come under official scrutiny this year by a government concerned about risks to the financial system. Among them are Dalian Wanda Group Co., Anbang Insurance Group Co., HNA Group Co. and Fosun International Ltd. The latest firm that may feel the heat: Sunac China Holdings Ltd.

Authorities got spooked by the amount of leverage Chinese companies deployed to back those overseas deals. In addition, the country has been trying -- with some success -- to stem capital outflows that were putting pressure on the Chinese currency. 2017 is also a politically sensitive year, with a twice-a-decade Communist Party congress taking place in October. Officials are stepping up checks on conglomerates to avoid the possibility of deals going bad in the run-up to a meeting that will shape the leadership of the party in the next decade. While de-risking has been the government’s mantra since 2015 -- when whiplash moves in Chinese shares ignited global turmoil -- the nation’s most powerful politicians are now weighing in. In April, President Xi Jinping chaired a gathering to discuss “safeguarding national financial-market security.”