China will be buzzing with mergers and acquisitions deals this year, led by a robust manufacturing sector, senior analysts at Price Waterhouse Coopers (PWC) predict.

"The Asia Pacific is about 20 per cent of the global M&A activity in the last period to which we have data, and in that China is the biggest single market. We see the market is very strong and we expect it to continue to grow," said Tony Poulter, PWC's Asia Pacific Advisory Leader.

"It has a very full range of activity, but particularly in manufacturing, because with some sectors of the economy which globally generate big deals not being open to M&A (here in China); and the service sector not yet being so developed, and it's bound to be largely in manufacturing," he told China Daily on the sidelines of this year's PWC Asia Pacific Advisory Conference, which closed yesterday.

"But I think over time that will change and obviously there is interest in liberalization, in the telecom sector for example, which will change that," he added.

A recent PWC report said M&A activity in China increased by 50 per cent last year from 2003, with 693 inbound and outbound deals being struck with an aggregate value of US$52 billion. The deals largely centred on energy utilities, mining and financial services, as well as transportation and distribution.

"The other very important thing is that Chinese companies are now looking outwards, which is obviously from our standpoint a significant development for us," said Frank Brown, PWC Global Advisory Leader.

PWC advisory experts tip engineering and component manufacturing as industries that have the ability and capital to expand internationally, he said.

"Generally a trend is, at the moment, China has many strong domestic brands but not being international brands with fame in international markets, so I think we might see expansion of some companies to acquire overseas brands, the manufacturing that backs up those brands is then domestically based," he said.

Aside from M&A growth, PWC also forecasts more opportunities for foreign investment in the public utilities and infrastructure sector.

"There is now a massive amount of capital focused on two things - I mean two of the hottest sectors in the world. One is China, and the other is infrastructure, so I think it is likely that the Chinese Government at both levels (ministerial and municipal) will see opportunities happen to that," said Poulter.

He said the government could make better use of the foreign capital available for the infrastructure sector, given the number of lenders and equity investors.

Source:China Daily