IBA Contributes to an Airline Economics Article on China Crossborder Investment, February 2018

In this ever changing world, there are constant changing policies and other drivers that affect crossborder investments from China and its impact on aviation investments.  While some changes have more direct impact than others, these main drivers further analyzed are the ones to watch going forward.

One of the major themes has been the explosive growth of Chinese outbound deals over the past five years which saw outbound M&A volume rise 33% per annum from $49bn to $227 in 2016 according to McKinsey.  While this growth has been more publicized, some other important facts might not be as acute.  While Chinese companies were involved in ten of the largest deals worldwide in 2016, most deals were in the middle market with the median ~$30m deal size. While the absolute volume has increased, there is arguably further room for growth as this volume as a percent of GDP is smaller for Chinese companies (0.9%) than its counterparts in Europe (>2.0%) and US (1.3) in 2015.

While this trend has been the case up until this year, the latest figures as year to date third quarter 2017 show that the number of Chinese company M&A deals has decreased 14.8% to 572 compared the previous year while the overall value has decreased 38.9% to $97.7 billion according to PWC. These figures represent a decrease in the share of overall investment in Europe and the U.S. from 77% for calendar year 2016 to 50% for latest figures. It’s noted that this decrease follows an almost 300% increase in the value of transactions to $214.9 billion for 2016.

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