China Lays the Groundwork for Domestic Merger Boom

China’s central planner, the National Development and Reform Commission, has set the stage for what could become the biggest theme in China over the next six to 12 months: a surge in domestic mergers and acquisitions that benefits the economy and stock market.

That can be concluded from the NDRC’s confirmation last week that the government is curbing “irrational” outbound acquisitions in some sectors, likely due to growing concern of systemic risks related to overseas deals, as well as pressure those investments have placed on the yuan. In fact, the government’s scrutiny of overseas deals has been evident since late last year based on the 46 percent drop in nonfinancial outbound investment in the first half of 2017 to $48.2 billion from a year earlier.