China must ensure overseas state assets are value for money, Premier says

China’s government is to assess whether its foreign investments are worthwhile, the country’s premier has said.

Li Keqiang told a conference that China must do more to ensure that state assets held overseas retain their value and that public funds are used safely.

The Chinese government has in recent years dramatically expanded its investments in foreign countries.

 Li said that China must make efficient and safe use of public funds.

 His comments will raise questions over the likelihood of China stepping in to provide financial assistance to state-owned companies which are struggling financially.

Chinese miner Yancoal is trying to raise AUD $3.2 billion in equity to buy a significant stake in Rio’s Australian coal business.

The company currently carries five times as much debt as comparable competitors, and its debt has previously caused it to lose ownership and control of three mines in the same region as the Rio Tinto assets.

With the company having run up $1.7 billion in losses over the last four years, Yancoal investors have lost 17.7 cents for every dollar they have invested.

China’s outbound M&A activity has increased for the seventh year in a row, exceeding American foreign investment for the first time.

The country’s M&A volume increased by $US219 billion last year, meaning it accounted for more than half of Asia Pacific’s outbound volume.

However, Chinese outbound investment is expected to be lower in 2017 following because of the government’s decision to respond to the falling value of the yuan and capital outflows by increasing regulatory scrutiny of overseas deals and major forex transactions.

America was last year the largest recipient of Chinese outbound foreign direct investment.