China tech firms ramp up M&A deals with the blessing of Beijing
[BEIJING] After a chastening crackdown that wiped billions off their value and forced top executives out of the public eye, China's technology giants are back in favour and on the front foot, making deals and snapping up assets.
At the top of the pile are Alibaba Group Holding and Tencent Holdings, two huge players that used to compete for acquisitions in everything from ride hailing and video streaming to online finance, until their wings were clipped by Chinese authorities concerned about their wide and powerful reach.
Nowadays, with China's economy struggling to pick up much growth momentum and tensions with the US and others rumbling on, the government's stance has shifted, especially with regard to key areas such as artificial intelligence and tech more broadly, where it's trying to stride ahead of rivals.
'We're seeing more normalisation when it comes to regulation of tech in China, which gives confidence to both companies and investors to start looking at deals again,' said Allan Chu, UBS Group's co-head of technology, media and telecommunications investment banking in the Asia-Pacific region. 'China wants to create national champions in areas such as AI and robotics, so we're poised to see more deals in those areas.'
Time for deals
Tencent's music platform agreed to buy podcasting startup Ximalaya this month, a step forward in its bid to be China's Spotify. That followed a Tencent subsidiary snapping up a nearly 10 per cent stake in SM Entertainment, a rare Chinese investment into a South Korean company in recent years.
In late 2024, Tencent acquired a majority stake in Guangzhou-based Kuro Games, a Guangzhou-based developer best known for its free-to-play gacha title Wuthering Waves. Bloomberg News has reported it is also studying a potential acquisition of Nexon.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
In April, Ant Group – founded by Alibaba pioneer Jack Ma, who disappeared from view in 2020 after criticising regulators – became controlling shareholder of Bright Smart Securities, which promptly rallied nearly 100 per cent the next day.
'Chinese technology companies have been very actively looking at acquisition opportunities both domestically and abroad, as they seek new growth areas and new markets,' said Ho-Yin Lee, head of Citigroup's APAC TMT investment banking group.
Dealmakers are also busy with disposals, joint ventures and other investments.
Alibaba, which has pledged to invest more than 380 billion yuan (S$68 billion) on AI infrastructure such as data centres over the next three years, has been very active, including selling its majority stake in hypermarket chain Sun Art Retail Group and department store business Intime Retail Group It also formed a US$4 billion JV with E-Mart's e-commerce platform in South Korea.
The uptick has come with the blessing of Beijing, eager to reduce any reliance on US technology. President Xi Jinping has met with prominent entrepreneurs to stress his support for them and the private sector. In September, a fresh batch of policies was introduced, emphasising themes such as business upgrades and innovation, and allowing listed companies to conduct more cross-sector deals.
With assets increasingly up for grabs, Chinese tech firms often tend to prefer to participate in a consortium instead of being the lead buyer, according to Ellis Chu, head of Asia M&A at Jefferies Financial Group.
New force awakens
Not long ago, China was warning about 'irregular expansion of capital' and monopolies. Amid the fallout, Tencent scrapped a plan in 2022 to acquire handset gaming brand Black Shark. Among other deals to collapse was a planned merger between DouYu International Holdings with Huya, which was rejected by regulators in 2021 on the grounds it would strengthen the game streaming dominance of Tencent, a shareholder in both companies.
Since then, AI has emerged as a major force, boosted by the success of Hangzhou-based DeepSeek, which sparked a rally in Chinese tech stocks this year. A group of startups known as AI Dragons or Tigers has bolstered China's AI credentials and attracted investment from both Alibaba and Tencent. Some are also considering moves such as initial public offerings.
'Market sentiment has changed in a positive way after a surge in AI interest earlier this year,' Chu at UBS said. 'Investor enthusiasm for China tech has come back, and that's led to more capital markets deals such as A+H listings, follow-on offerings and convertible bonds as companies seek to beef up their balance sheets. This strong appetite is poised to continue.'
Other deals include TikTok's owner ByteDance acquiring Shenzhen-based earphone maker Oladance, bringing on board a team of seasoned former Bose engineers. ByteDance has also delved into areas like robotics and edtech gadgets through in-house development or investments.
'We're likely to see more in-market consolidation in China,' Chu said. 'After years of being a growth market, now China is more mature for tech companies and, to a certain extent, similar to operations in the West.' BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
14 minutes ago
- Straits Times
EU prosecutors uncover criminal scheme involving Chinese imports via Greece
FILE PHOTO: A view of the container terminal of the Piraeus port, in Perama suburb of Piraeus, Greece January 28, 2025. REUTERS/Louisa Gouliamaki/File Photo European prosecutors have uncovered a criminal scheme involving false documentation of Chinese imports to Europe through the Greek port of Piraeus that defrauded authorities of about 700 million euros ($820 million) in lost customs duties and VAT revenue. The investigation carried out by the European Public Prosecutor's Office (EPPO) spans 14 EU countries and involved raids in Greece, Spain, France and Bulgaria, the EPPO said in a statement on Thursday. Ten suspects were arrested, including two customs officers during more than 100 searches conducted at the offices of customs brokers and other locations on Wednesday. Law enforcement agents seized thousands of e-bikes and e-scooters, as well as 480 containers for further checks and verification in the Port of Piraeus, with freezing orders issued to seize real estate, boats and bank accounts. Some 5.8 million euros in different currencies were seized, including 4.75 million euros in Greece, as well as several firearms and other weapons seized in the houses of three of the suspects. Eleven properties in Spain were also seized, as well as 27 vehicles and luxury items, the EPPO said. The EPPO said the scheme involved several criminal networks mainly controlled by Chinese nationals who handled Chinese imports into the EU, their distribution and sales, as well as money laundering and sending the profits back to China, the EPPO said. After the goods from China arrive in the EU, mainly through the port of Piraeus, they are undervalued or misclassified to evade custom duties, cleared by customs brokers and sold to companies in other EU states through the scheme designed to avoid the VAT payment, the EPPO said. It added that the criminal organisations under investigation produce the false invoices and transport documents to conceal the real destination of the goods, and recruit a network of sham companies that sell the products at very competitive prices, since VAT remains unpaid and customs duties and anti-dumping fees are largely evaded. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
28 minutes ago
- Straits Times
China-led AIIB could play a role in Asean power grid, says bank president
A signing ceremony for a loan agreement for the U-Tapao airport expansion project between Thailand and AIIB in Beijing on June 25. ST PHOTO: LIM MIN ZHANG - China's answer to the World Bank marked its 10th year with a pledge to double its annual lending by 2030 and focus on green projects, including in South-east Asia. These projects could include the Asean power grid, a plan for an electricity network to connect all 10 Asean countries. The three-day annual meeting of the Asian Infrastructure Investment Bank (AIIB) in Beijing this week was attended by more than 3,500 people from about 100 countries, including Chinese Premier Li Qiang. The China-led bank, founded in 2015, has to date approved more than 320 projects in 38 countries, worth some US$60 billion (S$76.3 billion). Modelled after other multilateral development banks (MBDs) such as the Asian Development Bank (ADB), the AIIB has grown from 57 founding members – including Singapore, Kazakhstan and Saudi Arabia as well as United States allies the United Kingdom, Germany and France – to 110 members today, behind only the World Bank, with 189 . The US and Japan are not AIIB members. In his speech on June 26, Mr Li said the AIIB's successful operation has been a 'useful supplement' to traditional multilateral development institutions, and has brought about 'incremental reform' to global financial governance. 'Its unique shareholding formula and decision-making rules reflect the new changes in the international economic landscape and raise the voice and influence of emerging markets and developing countries,' he said. The bank has developing countries as its majority shareholders, with China being by far the largest shareholder at about 27 per cent. The bank markets itself as being based on multilateralism and international standards, and has rejected suggestions that it is controlled by Beijing. Mr Jin Liqun, who has served as president since the bank's founding, said in a speech that the AIIB approved US$8.4 billion in financing in 2024, with an aim to double the amount of total yearly loans to US$17 billion in 2030. The AIIB's latest strategy document, approved this week, states more than half of its financing approvals every year until 2030 will be climate-related. At a press conference later, he noted that the idea of an Asean power grid was a very important one, in response to a question on the region's infrastructure development. He added that the AIIB would have a role to play in this power grid, particularly 'to provide renewable energy and build the regional power grid to help sustain the growth of the Asean region'. On June 24, the bank also elected a new president, Ms Zou Jiayi, who will take office in January 2026. Like Mr Jin, she is a former Chinese vice-finance minister. MDBs like the AIIB lend billions of dollars a year to support social and economic aims of recipient countries such as poverty reduction and sustainable development. Asia, in particular, faces an estimated infrastructure financing gap of US$500 billion a year till 2030. At the Beijing event, a signing ceremony was held for Thailand's loan of US$423 million for a second runway at U-Tapao Airport in the coastal Rayong province – AIIB's first sovereign loan to Thailand. The AIIB is also considering a US$300 million loan to Indonesia for a fixed road crossing from Batam island to Bintan island, via the Tanjung Sauh islands. Dr Yu Hong, a senior research fellow at the East Asian Institute in Singapore, said that the AIIB has achieved a measure of international recognition, contrary to the prognosis of critics in its earlier years who worried about whether its projects will comply with environmental and labour standards. 'AIIB's success for the last 10 years in terms of its AAA credit rating and expansion of lending has boosted China's influence and given it confidence… This has also helped China project soft power,' he told The Straits Times. The AIIB received its first AAA credit ratings in 2017. But Dr Yu, who has done research on the AIIB, believes that the bank has yet to become a 'formidable competitor' to other major Western-dominated MDBs – the ADB, World Bank and International Monetary Fund (IMF ) – in terms of infrastructure financing, noting that the AIIB has mostly co-lent with other MDBs. The AIIB was proposed by Chinese President Xi Jinping in October 2013. Observers saw its creation as stemming from Chinese dissatisfaction with Western dominance of existing international financial institutions which wa s not reflective of China's economic heft. China's 27 per cent voting rights at the AIIB are far more than its 6 per cent at the World Bank. The AIIB has a multinational staff, including its senior management, which is led by a Chinese national. The AIIB , while boosting China's influence overseas, is largely seen as a multilateral organisation that does not warrant politicising by major powers such as the US. Professor Tamar Gutner of the American University in Washington, who wrote a 2025 book on the AIIB, said that given how deeply MDBs are networked, and that many MDBs have a powerful US role, 'I don't think countries will face pressure not to borrow or to borrow less from the AIIB'. 'The AIIB is clearly a multilateral organisation, not a Chinese organisation. All major donors... are members. However legitimacy can be fragile, so any move by the AIIB away from its multilateral character could raise questions,' she told ST. Mr Steward Paterson, a senior fellow at the Hinrich Foundation who has written a book on the trade relationship between the West and China, sees the AIIB's role as largely symbolic and one that brings prestige to China. The crucial overseas lending from China has been made by the Export-Import Bank of China and the China Development Bank, he noted. 'Their balance sheet dwarfs the AIIB's.' The two state-owned banks are crucial funders of China's Belt and Road Initiative, Beijing's infrastructure building programme in largely developing countries that is estimated to have funded US$1 trillion worth of projects since its inception in 2013, from roads and railways to ports and energy plants. Indonesia's Finance Minister Sri Mulyani Indrawati, in her speech on June 26, said the AIIB was no longer just an emerging bank but a 'global force for development', while urging it to improve the affordability of its financing. Indonesia is a founding member which has worked on 14 projects with the AIIB. 'Many of the member countries in need of infrastructure development are still facing severe fiscal constraints. In today's high interest rate environment, competitive pricing is critical,' she said. Lim Min Zhang is China correspondent at The Straits Times. He has an interest in Chinese politics, technology, defence and foreign policies. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
2 hours ago
- Business Times
Luxury sector pins hopes on Middle East despite clouds from conflict
[PARIS] With Middle East airspace reopening and the US-brokered ceasefire between Israel and Iran appearing to hold, the luxury sector is still counting on the region's wealthy shoppers to help offset weakness in its main US and Chinese markets – for now. The Middle East, helped by strong tourist flows and local wealth, has bucked a recent global slowdown in luxury sales that is expected to deepen this year, with some brands growing sales there at double-digit rates. Luxury sales in Gulf countries were up 6 per cent to US$12.8 billion of the nearly US$400 billion market last year, outpacing a global drop of 2 per cent, with strong appetite for high-end fashion, jewellery and beauty products, retail consultant Chalhoub Group said. However, that trade is heavily dependant on the region's burgeoning tourist trade, with consulting firm Bain estimating that some 50 to 60 per cent of the Middle East's luxury sales come from tourists. This month's outbreak of an air war between Israel and Iran emphasised the ongoing risks in a region in which unrest was already simmering, with airlines cancelling flights and rerouting planes following Israel's strikes against Iran on Jun 13 – measures that are now being unwound. 'At this point, we have not adjusted our long-term growth forecast, as we continue to see considerable potential in the region,' said Federica Lovato, senior partner at Bain. A NEWSLETTER FOR YOU Friday, 2 pm Lifestyle Our picks of the latest dining, travel and leisure options to treat yourself. Sign Up Sign Up 'However, short-term volatility has increased in the last few weeks and may continue, depending on how the situation develops.' The region is an important hub for travel spending, favoured by Russian oligarchs but also wealthy Asians, and has increased in importance since Russia's invasion of Ukraine triggered sanctions and the rerouting of flights between Europe and Asia from more northerly routes to the Middle East. It also serves as a gateway for high-end brands to reach wealthy shoppers from India, where high tariffs have kept companies like LVMH from expanding store networks. Max Heinemann, co-CEO of travel retail group Gebr Heinemann, which recently expanded into Saudi Arabia and operates airport fashion retail stores carrying luxury brands in Jeddah, said the region's travel market has shown long-term resilience despite unrest. He remains optimistic. 'Dips may be witnessed, but growth will remain,' he said. At Prada, first-quarter sales in the region rose 26 per cent year on year, while Hermes' sales there were up 14 per cent. High-end fashion and jewellery brands have been opening new stores and hosting splashy events. Milan-based menswear label Zegna this month took its spring collection to the opera house in Dubai, the region's leading luxury hub, for a catwalk show in an elaborate set evoking an Italian villa. Elie Saab held its 45th anniversary show in Riyadh last November, featuring a performance from Celine Dion. Dior, Saint Laurent and Valentino last year opened stores in Bahrain, while this year Louis Vuitton brought guests to the Dubai desert for a dawn meal and Chanel hosted a dinner in Abu Dhabi linked to a high jewellery launch. But maintaining visitor numbers to Middle Eastern destinations will be vital to bringing shoppers through the doors. Luxury travel agency Global Travel Moments says that for now, its long-term travel volumes to the Middle East have been unaffected by the latest unrest. However, given recent events, there is currently 'certainly more caution' before finalising trips to the broader Middle East, it said. REUTERS
