China Deal Watch

Chinese companies are buying up overseas assets at a faster pace than U.S. buyers for the first time on record. This graphic, updated weekly, takes a close look at what China is acquiring, and where. The numbers reveal a lot about the country’s growing global ambitions.

On Oct. 18, China Life Insurance Co Ltd agreed to buy select-service hotel portfolio fromStarwood Capital Group LLC for $2 billion. Here’s how this deal compares to China’s other overseas acquisitions:

Rank17thlargest foreign acquisition by a Chinese company this year

2016 Total$206.6Bin foreign mergers and acquisitions

Growth212%increase from the same period in2015

China’s overseas dealmaking started as a hunt for the raw materials needed to feed steel mills, support industrial production and keep the nation’s factories humming—the so-called old economy.

As China grew, so did its appetite for foreign acquisitions. They’ve shifted focus to acquiring the brands and technology China needs to transition to an economy driven by domestic consumption more than exports, labeled here as the new economy.

Total volume of China’s overseas deals

As China’s dealmaking exploded, the types of companies it’s buying have changed. That change is easy to spot when you look at the industries of the target companies.

Deal volume by industry

Before 2013, China’s overseas dealmaking was dominated by state-owned companies acquiring iron ore deposits in Australia, energy producers from Canada and copper mines in Africa. More than half of the purchases were of energy and commodities companies. Now private entrepreneurs are snapping up marquee assets like Italian football teams, American film studios and French fashion houses while government-backed buyers purchase chipmakers and crop technology. For a better sense of how China’s targets have changed, let’s look at annual deal volumes by industry.  

Total deal values 2006 to 2016

Traditional Energy

Total: $147.1B

Finance

$80.9B

Mining

$72.5B

Chemicals

$56.7B

Property

$44.8B

Internet/Software

$40.6B

Utilities

$38.8B

Logistics

$30.2B

Environment/New Energy

$23.9B

Automotive

$18.5B

Retail/Wholesale

$18.4B

Health

$16.3B

Entertainment

$16.2B

Semiconductors

$13.9B

Home/Office Products

$13.6B

Manufacturing

$13.2B

Construction

$13.0B

Food/Beverage

$12.2B

Commercial Services

$10.8B

Agriculture

$8.1B

Telecom

$7.2B

Media/Ads

$6.4B

Aviation

$6.3B

Electronics

$5.0B

Favorite destinations

The charts below show China’s favorite destinations have shifted over time. Every deal of at least $100 million since 2006 is displayed.

China has made energy acquisitions across the world, with the biggest being Cnooc Ltd.’s 2012 agreement to buy Canada’s Nexen Inc. for $14.3 billion following smaller deals in Central Asia, Europe and South America. In recent years, it has started buying more consumercompanies, with a $4.7 billion deal for U.S. pork producer Smithfield Foods Inc. in 2013 and this year’s $821 million purchase of Italian soccer team AC Milan. China has also made bolstering its technology prowess a national priority, leading to purchases like an IBM server business and chip designer Spreadtrum Communications Inc. See all

China’s

Agreed to acquire

For

North America

Western Europe

Asia Pacific

Latin America/Caribbean

Eastern Europe

Middle East/Africa

Can China keep buying at this speed?

The short answer: yes—unless something gets in the way. The growing number of deals is attracting close government scrutiny within China and around the world. Here are several potential roadblocks that could slow the pace of acquisitions:

Western governments step in to block purchases

The Committee on Foreign Investment in the U.S. has rejected some transactions in the technology industry and is wary of any potential acquisition that could affect national security. In Europe, German politicians expressed opposition to a Chinese takeover of robot maker Kuka AG, and the new U.K. government plans to create its own process for reviewing large investments in sensitive industries.

China’s own government cracks down on some types of deals

The Chinese securities regulator has sought to block pricey backdoor listings on domestic exchanges. Since many Chinese acquirers wanted to make money by relisting their purchases on a domestic bourse at a higher valuation, the additional scrutiny could upset their plans.

China puts limits on overseas fund flows

China’s currency supervisor has started to hold up overseas money transfers as it seeks to manage yuan outflows. Once a rubber stamp, the decision to approve cross-border fund transfers can now take weeks and delay M&A deal closures. The purchase of Qihoo 360 Technology Co., the largest privatization of a Chinese company listed in the U.S., missed its initial deadline after getting caught up in the process.

Banks curb their easy lending policies

Chinese banks have shown no lack of willingness to provide funding for acquisitions from both state-owned companies and private enterprises, with some forms of lending more than doubling this year. Any move to reign in credit to such buyers would hurt their ability to make splashy purchases.

China’s currency declines in value

Chinese companies expect the yuan to depreciate more, which would make overseas dealmaking more expensive. That’s encouraged them to make acquisitions now while their greater purchasing power lasts. If the Chinese currency has a serious decline, it could make domestic purchases more attractive again.

Source: Data compiled by Bloomberg

Credit: Yue Qiu, Mathieu Benhamou, Ben Scent, Cynthia Hoffman, Jonathan Browning, Cedric Sam, Parker Leung and Adrian Leung

Methodology: Target and acquirer names are as of today. All other data are as of the deal announcement date. All deals involving the acquisition or sale of control of a company or asset for strategic purposes, as well as minority purchases, private equity investments and venture capital rounds of financing, are included. Both pending and completed deals are shown.

Aggregate volume figures are calculated using enterprise value, which is equal to the equity value plus the target’s net debt. Individual deals display the equity value. Geographical references are based on country of risk, which may differ from country of domicile.

Deals where the acquirer is a Chinese private equity fund managed by a general partner whose country of risk is outside China have been excluded. This accounts for the small difference in aggregate deal volume between this story and figures shown in the MA<Go> function on the Bloomberg Professional service, which classifies deal data in greater depth and includes these deals.

Bloomberg classifies companies by tracking their primary business activities as measured by their primary source of revenue. Target companies are classified under one of 73 industry groups as shown on the MA<Go> Bloomberg function. This graphic regroups the 73 industries into 25 broader categories.

Old Economy:
Agriculture
Chemicals
Construction: Building Materials; Engineering & Construction; Home Builders; Shipbuilding
Home/Office Products: Home Furnishings; Household Products/Wares; Housewares; Office/Business Equipment; Office Furnishings
Logistics: Packaging & Containers; Storage/Warehousing; Transportation; Trucking & Leasing
Manufacturing: Hand/Machine Tools; Machinery-Diversified; Metal Fabricate/Hardware; Miscellaneous Manufacturing; Textiles
Mining: Forest Products & Paper; Iron/Steel; Machinery-Construction & Mining; Mining
Utilities: Electric; Gas; Water
Traditional Energy: Coal; Oil & Gas; Oil & Gas Services; Pipelines

New Economy:
Automotive: Auto Manufacturers; Auto Parts & Equipment
Aviation: Aerospace/Defense; Airlines
Commercial Services
Electronics: Electrical Components & Equipment; Electronics
Entertainment: Entertainment; Leisure Time; Toys/Games/Hobbies
Environment/New Energy: Energy-Alternate Sources; Environmental Control
Finance: Banks; Closed-end Funds; Country Funds-Closed-end; Diversified Financial Services; Insurance; Investment Companies; Private Equity; Savings & Loans
Food/Beverage: Beverages; Food; Food Services
Health: Biotechnology; Healthcare-Products; Healthcare-Services; Pharmaceuticals
Internet/Software: Computers; Internet; Software
Media/Ads: Advertising; Media
Property: Lodging; Real Estate; REITS
Retail/Wholesale: Apparel; Cosmetics/Personal Care; Distribution/Wholesale; Retail 
Semiconductors
Telecom: Telecommunications

Other: 
Holding Companies-Diversified
Unclassified

For multi-target deals, the full value of the transaction is credited to the industry and region of the first target company listed in the deal entry shown in the MA<Go> function on the Bloomberg Professional service.

The contest to control the South China Sea just got a lot more complicated

• Max Boot, Foreign Policy

• 10h
• 8,716
 
• 9

Philippine President Rodrigo Duterte, right is shown the way by Chinese President Xi Jinping before a signing ceremony on October 20, 2016 in Beijing, China. Getty Images

International relations theorists of a "realist" persuasion like to claim that states are rational actors pursuing their strategic interests in an anarchic world where power alone matters. Ideology and domestic politics do not much concern these thinkers; they believe that a nation's foreign policy is much more likely to be shaped by factors such as geography, demography, and economics.

This was the viewpoint of Richard Nixon and Henry Kissinger, who famously tried to realign China from being a foe of the United States to a friend — never mind that the Chinese leader they had to deal with was Mao Zedong, one of the worst mass murderers in history. "Nixinger" believed, correctly, that China's interest in countering Soviet power would lead it to draw closer with the United States.

But even in the case of China the applicability of realist insights was limited. China did not begin the transformation that would make it a leading economic force and trade partner of the United States until Mao had died, replaced by the reformist Deng Xiaoping. Even today China is more foe than friend of America.

Today, the Philippines is Exhibit A in illustrating the limits of the realist conceit that some unvarying strategic logic governs foreign policy. The Philippines has seen a vertigo-inducing change in its foreign-policy orientation since Rodrigo Duterte became president this summer. This crude populist is now transforming the Philippines' relationship with the United States in a fundamental and worrying manner.

The Philippines is America's oldest ally in Asia, and until recently one of the closest. The United States ruled the Philippines as a colonial power from 1899 to 1942 and implanted its culture in the archipelago. In World War II, U.S. and Filipino troops fought side by side against the Japanese occupiers. In 1951, Washington and Manila signed a mutual defense treaty.

For decades afterward, the Philippines hosted two of the largest U.S. military installations overseas at Clark Air Force Base and Subic Bay Naval Base. Those bases were closed in 1991 amid a wave of anti-Americanism, but the U.S. military presence has been ramping up again as the Philippines felt increasingly threatened by Chinese military expansionism.

In 2014, President Barack Obama signed an agreement with then-President Benigno Aquino III that would allow U.S. forces more regular access to bases in the Philippines and increase the tempo of training exercises and military cooperation between the two countries.

Now that achievement looks increasingly like a dead letter. Duterte journeyed to Beijing this week to announce his "separation from the United States" in military and economic terms. "America has lost," Duterte said. He claimed that a new alliance of the Philippines, China, and Russia would emerge — "there are three of us against the world." His trade secretary said the Philippines and China were inking $13 billion in trade deals; that's a pretty hefty signing bonus for switching sides. Duterte said he will soon end military cooperation with the United States, despite the opposition of his armed forces.

Since assuming office in June, Duterte has radically realigned the Philippines' interests. Jason Lee/Reuters

What could account for this head-snapping transformation? Manila's strategic and economic interests have not changed. While China is the Philippines' second-largest trade partner, itslargest is Japan, a close American ally and a foe of Chinese expansionism. The third-largest trade partner is the United States. The fourth-largest is Singapore, another U.S. ally that is concerned about China's vast territorial ambitions and aggressive behavior. Taken together, the Philippines sends 42.7 percent of its exports to Japan, the United States, and Singapore, compared with only 10.5 percent to China and 11.9 percent to Hong Kong. The Philippines gets 16.1 percent of its imports from China; almost all of the rest comes from the United States and its allies, including Japan, Taiwan, Singapore, and South Korea. So it's not as if there is an especially pressing economic case for the Philippines to realign from the United States to China.

There is a pressing strategic case, however, not to do so. China continues to assert sovereignty in the South China Sea in violation of Philippine claims, as an international court ruled in Julyin a case brought by Duterte's predecessor. China wants to grab for itself what could be billions of dollars' worth of natural resources, from fish to oil, in the South China Sea.

Moreover, the Philippine people remain largely pro-American. English is the lingua franca of the Philippines. The Armed Forces of the Philippines have many decades of cooperation with the United States and have been built in the image of the U.S. military; they have no experience working with China's People's Liberation Army. Moreover, and despite Duterte's nasty rhetoric and ad hominems, the United States continues to express its desire to protect the Philippines.

The resource-rich South China Sea is hotly contested. Reuters

This massive geopolitical shift is entirely Duterte's doing. It cannot be explained any other way. It is a product of his peculiar psychology.

He has long been ideologically hostile to the United States — he has called Obama a "son of a whore" — and he feels an ideological affinity with China's authoritarian rulers. Although elected democratically, Duterte is a strongman in the making. He has already violated the rule of law to unleash death squads that are said to have killed at least 1,900 people, including a 5-year-old boy, in the name of fighting drugs. He has cited Hitler as his role model: "Hitler massacred 3 million Jews. Now, there is 3 million drug addicts. I'd be happy to slaughter them." He has also said "I don't give a sh--" about human rights. China's rulers don't put their worldview quite so crassly, but they, too, don't care much for human rights. The Duterte-Xi Jinping marriage thus seems like a natural match.

From the American viewpoint, Duterte's flip-flop — assuming it leads to a lasting strategic shift — is a potential disaster. Aligned with the United States and its regional allies, the Philippines can provide a vital platform to oppose Chinese aggression in the South China and East China seas.

If the Philippines becomes a Chinese satrapy, by contrast, Washington will find itself hard-pressed to hold the "first island chain" in the Western Pacific that encompasses "the Japanese archipelago, the Ryukyus, Taiwan, and the Philippine archipelago." Defending that line of island barriers has been a linchpin of U.S. strategy since the Cold War. It now could be undone because of the whims of one unhinged leader.

China could either neutralize this vital American ally or even potentially turn the Philippines into a PLA Navy base for menacing U.S. allies such as Taiwan, Japan, and Australia. At the very least, the U.S. Navy will find it much harder to protect the most important sea lanes in the world; each year $5.3 trillion in goods passes through the South China Sea, including $1.2 trillion in U.S. trade.

The opposition is already making hay over Duterte's China trip. A Supreme Court justice in Manila has warned the president that, were he to give up sovereignty over the Scarborough Shoal, it could result in his impeachment. The only good news from the American standpoint is that what Duterte is doing could be undone by a more rational successor, assuming that democracy in the Philippines survives this time of testing.

Max Boot is a senior fellow at the Council on Foreign Relations.

Read the original article on Foreign Policy. "Real World. Real Time." Follow Foreign Policy on Facebook. Subscribe to Foreign Policy here. Copyright 2016. Follow Foreign Policy onTwitter.

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A massive cyberattack is taking down major websites across the internet

• Kif Leswing
 

• 5h
• 117,162
 
• 61

AP Photo/Connie Zhou

Internet users around the world, but mostly in the US, reported that some top websites were not loading on Friday morning.

The affected sites include Amazon, Twitter, Netflix, Etsy, Github, and Spotify.

The issue is currently ongoing.

It was mostly resolved at 9:20 a.m. ET, but at 12:07 p.m. ET, the issue started to crop up again, according to one of the companies at the center of the apparent cyber attack. 

The issue appears to have something to do with DNS hosts — in particular, Dyn, one of the biggest DNS companies.

Domain Name Servers are a core part of the internet's backbone. They translate what you type into your browser —www.businessinsider.com, for example — into IP addresses that computers can understand.

Dyn said on Friday that it suffering a DDoS attack, or a distributed denial of service. That basically means hackers are overwhelming Dyn's servers with useless data and repeated load requests, preventing useful data — the Twitter IP address, for example — from getting through.

No group has taken credit for the DDoS attack yet. The Department of Homeland Security is monitoring the attack, Politico's Eric Geller reports. 

Here's how it unfolded, according to Dyn, the company being attacked. 

7:10 a.m. ET: 

"Starting at 11:10 UTC on October 21th-Friday 2016 we began monitoring and mitigating a DDoS attack against our Dyn Managed DNS infrastructure. Some customers may experience increased DNS query latency and delayed zone propagation during this time. Updates will be posted as information becomes available."

8:45 a.m. ET:

"This attack is mainly impacting US East and is impacting Managed DNS customer in this region. Our Engineers are continuing to work on mitigating this issue."

9:36 a.m. ET: 

"Services have been restored to normal as of 13:20 UTC."

 As of 12:06 p.m. ET, the attack had returned:

"As of 15:52 UTC, we have begun monitoring and mitigating a DDoS attack against our Dyn Managed DNS infrastructure. Our Engineers are continuing to work on mitigating this issue."

12:48 p.m. ET: 

"This DDoS attack may also be impacting Dyn Managed DNS advanced services with possible delays in monitoring. Our Engineers are continuing to work on mitigating this issue."

1:53 p.m. ET: 

"Our engineers continue to investigate and mitigate several attacks aimed against the Dyn Managed DNS infrastructure."

CNBC reported that Amazon investigated the issue as well. "Amazon & DynDNS investigating internet outage reports on east coast of U.S. amid reports of major websites not working properly," it somehow tweeted.

Earlier this month, the United States transferred its oversight of DNS to an international non-profit group, a move that had been more than 20 years in the making. 

Here's a map of reported outages as of 9:20 a.m. ET, via Down Detector:

Level3/Down Detector

According to Hacker News and reports, some of the sites affected include:

- DYN

- Twitter

- Etsy

- Github

- Soundcloud

- Spotify

- Heroku

- Pagerduty

- Shopify

- Okta

- Zendesk

- Business Insider

SEE ALSO: Trivago is planning to go public by Thanksgiving

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More: DNS DDoS Internet

AT&T and Time Warner are reportedly talking about a merger

• Matt Turner and Steve Kovach

• 20h
• 6,064
 
• 3

Jeff Bewkes, CEO of Time Warner. Thomson Reuters

AT&T and Time Warner executives have met to discuss business strategies that could include a merger, according to Ed Hammond, Alex Sherman and Scott Moritz at Bloomberg. 

The talks are informal, and neither side has hired an adviser, according to the report.

Time Warner's share price jumped 5% on the news, while AT&T dropped 2.2%.

Time Warner has been an attractive target for several large companies. Apple considered buying the company earlier this year, according to the Financial Times.

It's also another indication that service providers are getting more and more interested in owning and investing in content. Verizon recently bought AOL and is in the process of acquiring Yahoo. AT&T merged with DirecTV last year.

The Bloomberg report says Time Warner CEO Jeff Bewkes is a "willing seller," so expect to see more interest around the company.

A spokesperson for AT&T declined to comment.

This is probably a good time to mention that Bewkes and AT&T CEO Randall Stephenson will both be speaking at Business Insider's IGNITION conference in December. Should be fun!

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