After clamping down on outbound investment last year, China's government appears to be tightening its vise even further in 2018.
In recent months, China's planning, financial and regulatory agencies have issued a slew of warnings, threatening to curb overseas investment with new guidelines, restrictive categories and reviews.
Last month, the government added to the roster of discouraging measures with a 36-point "code of conduct" for outbound direct investment (ODI).
The vaguely-worded rules require enterprises to invest "in line with their own conditions and abilities." But the provisions carry a pointed message for those seen as violators of the government's investment policies.
"Some enterprises do not perform domestic and foreign examination procedures," said the National Development and Reform Commission (NDRC).
"Some enterprises make blind decisions and cause significant economic losses. Some enterprises are (engaged in) vicious competitions that undertake offshore projects irrespective of cost," the top planning agency said.
"Companies engaged in outbound investment should not violate national interests and security, as well as macro and industrial policies," the NDRC said, according to state media.
The code of conduct amplifies restrictions announced in December 2016 after a stunning 44-percent surge in non-financial ODI, as groups with questionable finances snapped up foreign assets, including pricey property and entertainment firms.
In August, the government warned it would scrutinize "irrational" deals that smacked of capital flight or money laundering, raising the bar for investments in real estate, sports clubs, entertainment and hotels.
While new rules issued on Dec. 26 ease reporting requirements for overseas investments under U.S. $300 million (1.9 billion yuan), the authorities made clear they are not done with restrictions.
On Dec. 22, NDRC Minister He Lifeng told the official English-language China Daily that the government means to impose an "all-around" supervision on ODI activity with a "comprehensive" new law.
The threat of tougher regulation has already gone a long way toward reversing the 2016 buying spree.
China's ODI dropped 45.8 percent from a year before in the first half of 2017 and remained 33.5 behind the year-earlier pace through November, according to official data.
There are also hints that some of China's most controversial ODI deals have come under pressure.
On Dec. 19, The Wall Street Journal reported that the investing giant HNA Group is trying to offload a U.S. $6-billion (39.3-billion yuan) portfolio of commercial properties in New York, London, and other cities after making more than U.S. $40 billion (262 billion yuan) worth of acquisitions since 2015.
HNA, which soared into the ranks of the top global investors after humble beginnings as Hainan Airlines, has been dogged by questions about ownership and financing. The company has previously estimated it has over U.S. $100 billion (655 billion yuan) in debt, The Journal said.
The property and cinema conglomerate Dalian Wanda Group is also trying to sell five overseas projects valued at U.S. $5 billion (32.7 billion yuan), the South China Morning Post reported.
China's regulators have urged banks to be cautious about lending to the biggest buyers of the 2016 gold rush, including HNA, Wanda, Fosun International and Anbang Insurance Group, the paper said.
The combination of pressures could spell the end of the Chinese investment boom in the United States, at least at the 2016 levels. The flood of deals has been blamed for inflating asset and housing prices in major U.S. cities.
In 2016, Chinese investment in the United States soared to U.S. $55.6 billion (364.5 billion yuan) from U.S. $18.6 billion (121.9 billion yuan) a year earlier, according to the China Global Investment Tracker, compiled by the American Enterprise Institute (AEI) and the Heritage Foundation in Washington.
By mid-2017, investments had dropped back by about 50 percent from a year earlier to U.S. $17.7 billion (116 billion yuan), according to tracker data on deals of U.S. $100 million (648 million yuan) or more.
Derek Scissors, an Asia economist and resident scholar at AEI, said a "10-month frenzy" of investment in the United States accounted for about U.S. $48 billion (314.6 billion yuan) during the peak period.
"If you mean the 10-month frenzy in 2016, that's over, but it was the exception. We'll go back to the (U.S.) $20-billion (131-billion yuan) annual pace of 2015 and a few years prior," Scissors said by email.
Data from the China Investment Monitor of the New York-based Rhodium Group, including smaller transactions, suggests a similar trend. In the first three quarters of 2017, investment in the United States stood at U.S. $26.4 billion (171 billion yuan) after reaching U.S. $46.2 billion (300 billion yuan) in all of 2016, the monitor said.
The Chinese restrictions have combined with U.S. controls on sensitive acquisitions to dampen investment.
In the most recent case last week, China's Ant Financial said it had dropped a U.S. $1.2-billion (7.9-billion yuan) bid to buy financial transfer company MoneyGram after failing to win approval from the Committee on Foreign Investment in the United States (CFIUS).
"The collapse of the deal offers the latest sign of a shift ... over how Washington treats Chinese acquisitions of American assets," The Wall Street Journal said.
Motives for investment controls
As the ODI numbers have changed, so have the major motives for China's investment controls.
In late 2016, the curbs were seen largely as a reaction to government fears about capital flight under pressure from the stronger dollar, rising U.S. interest rates and a decline in China's foreign exchange reserves, as well as corruption concerns.
As ODI climbed and foreign direct investment (FDI) waned, China first became a net capital exporter in 2014, according to official figures cited by China Daily.
The most recent flurry of measures suggests a mix of motives, including worries about financial risk.
The government is trying to steer investment into its "One Belt, One Road" (OBOR) initiative to build China's world trade infrastructure and public-private partnerships (PPP) with state-owned enterprises (SOEs).
In a recent interview, University of Pittsburgh professor and China economist Thomas Rawski said the priorities for OBOR and PPP investments are signs that the government under President Xi Jinping is treating private capital as its own to further policy goals.
At the start of 2018, concerns about financial risk also appear to be a critical factor as the government seeks to bar outflows that result from the "vicious competitions that undertake offshore projects irrespective of cost."
Uncertainty over the financial backing for the spectacular growth of investment groups like HNA may be the thread that could pull China's highly-leveraged financial system apart.
In its report on HNA, The Journal cited the view that the company "is 'too big to fail,' given that many large Chinese banks have exposure to it."
Groups including HNA and Anbang have been criticized for paying high premiums for foreign real estate and other assets, raising the risk of significant losses if or when they are sold.
China's government has made management of financial risk one of its main goals for 2018-2020, along with poverty reduction and pollution control.
But its priorities came under fire after a policy statement from last month's annual Central Economic Work Conference failed to mention "deleveraging," or reducing reliance on credit, as an objective.
Instead, the economic planners signaled tolerance for further lending to support the economy, concluding that "current and social financing should see reasonable growth."
Getting tough on investment
The controls on ODI suggest that policymakers will take a selective stand on financial risks, getting tough on investment while giving the government a free hand to promote growth as needed with increases in debt if necessary.
But the vague language of the official documents is likely to keep China's over-extended investment groups guessing about what will or won't be allowed.
"The general standard is to examine whether the overseas investment is against national security interests," an NDRC official who declined to be named told China Daily, speaking of the ODI rules.
On Dec. 30, government regulators also signaled their concerns about the risk posed by capital outflows as the State Administration of Foreign Exchange (SAFE) announced new limits on overseas cash withdrawals from domestic bank cards.
The rules will allow individuals to withdraw a total of no more than 100,000 yuan (U.S. $15,356) annually. Previously, the limit was 100,000 yuan per card.
The new limits were needed "to curb money laundering, terrorist financing and tax evasion," the official Xinhua news agency said.