Retailer Suning has become the latest Chinese company to "come under attack" for "irrational" foreign acquisitions, according to Gabriel Wildau of the FINANCIAL TIMES. State broadcaster CCTV criticized the group's purchase of Serie A side Inter Milan in a report "highlighting the financial risks of outbound deals." Shares in Shenzhen-listed Suning Commerce Group fell by as much as 6.5% on Wednesday. Criticisms by CCTV are "often viewed as a signal that a company is facing regulatory or legal scrutiny from Chinese authorities." In an episode of news magazine program News 1+1, CCTV hosted Yin Zhongli of the Chinese Academy of Social Sciences' Financial Research Institute to discuss the "recent wave of outbound investment." Yin said, "Most of these companies have high debt ratios domestically, but they borrow money from banks to squander abroad or to buy assets. If there's an error with foreign investment, it adds risk for domestic banks and the financial system, while the companies dress themselves in gold." Suning "did not respond to requests for comment" (FT, 7/19). In Hong Kong, Xie Yu reported when asked why a Chinese company would take over Inter Milan, which has total losses amounting to €275.9M ($317.8M) over five years, Yin said, "Some companies are already highly indebted at home, yet they spend lavishly with bank loans abroad. ... I think many overseas acquisition deals have a low chance of generating cash flow, and I cannot exclude the possibility of money laundering." While the investments into some football clubs "came across as unreasonable, like the two Milan deals," their valuations do not seem to be inflated "based on a market fair value," said a banker who had been involved in a cross-border football club deal. The banker said, "For example, if one wants to turn $10 million of illegal money to come from a legitimate source, he would have to inflate a deal worth $50 million to $60 million." The club deals were seen "more as a means by the Chinese companies to move their assets out of the country," as Beijing "shut its door on capital outflows" that had only recently been responding to the government's earlier "go global" calls (SOUTH CHINA MORNING POST, 7/19).
