May 29, 2019 (China Knowledge) - China’s retail sector will likely see more mergers and acquisitions as uncertainty surrounding the Sino-US trade war and stimulus to boost consumer spending will bring Chinese companies to place more focus on the domestic market.
One of the effects of the trade war is that China now has to focus more on developing its domestic market. This could lead to greater merger and acquisition activity among Chinese companies with multinational companies also potentially coming in to fill the void left by their US counterparts.
As it stands, the domestic Chinese market is simply too big to be ignored and foreign players will still continue keeping an eye on China, looking out for depressed valuations or companies who are already planning exits as buying opportunities.
In addition, Chinese companies may also look to deploy more capital domestically, increasing the potential of the domestic consumer market. Outbound M&As have already fallen by more than 50% between 2016 and 2018 while domestic deals remained relatively flat within a 12% range during the same period.
Despite this, Chinese companies will still continue to acquire foreign brands as needed as these companies look to acquire recognized products to increase their domestic reach and market share.
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