China to have record year for M&A activity

BEIJING (XFN-ASIA) - Standard & Poor's Ratings Services said it expects 2006 to be a record year for mergers and acquisitions (M&A) activity in China.

The ratings agency said in a statement that it expects to see larger M&A actions by Chinese companies this year in both the overseas and domestic markets as they attempt to diversify their skills by entering overseas markets or consolidate their domestic market positions via foreign investment.

'But if (Chinese companies) absorb excessively high debt levels from target assets or over-leverage to pay for acquisitions, their credit health could become strained,' Standard & Poor's said.

Standard & Poor's expects to see significant outward investment in the areas of oil and gas, mining, high-tech, telecommunications and manufacturing.

Inward investment will occur in the banking, cement, auto, retail and chemical industries.

The ratings agency said it expects to see domestic consolidation in the areas of banking, steel, aluminum, cement, real estate, pharmaceuticals and retail.