The climate for M&A deals in mainland China is proving its resilience in challenging global economic times, with overall M&A activity up 5% in 2011 to 5,364 deals, the highest annual total ever. 

The activity comprises strong growth in outbound M&A deals by China buyers, domestic strategic deals and larger size private equity transactions. 

Specifically, China outbound continued on its impressive growth trajectory climbing to a new record of 207 deals in one full year, up 10% and to a value of US$42.9 billion an increase of 12% from 2010 levels.  Domestic M&A activity powered ahead by 11% with 3,262 deals.

"Confidence among investors looking for both M&A deals within China and for suitable deals abroad remains surprisingly robust despite the macro economic climate globally," says David Brown, PwC Greater China Private Equity Group Leader. 

Brown notes that the numbers suggest that the appetite for deals by investors in China is stronger than ever, across a broad range of industries and geographical locations.  As China's economy moves into a new phase, M&A is emerging as a key enabler of consolidation, growth, market positioning and the acquisition of strategic assets and expertise.

There were 16 outbound M&A deals by China buyers with a value exceeding US$1 billion announced in 2011, compared to 12 in 2010.  Fourteen of these mega deals were in the resources and energy sector. 

However, also noteworthy is China's increasing focus on the consumer and industrial products industries, reflecting China's gradual shift to a consumer-driven economy. 

"The drive for resources and energy is well understood," Brown said, "but the need to secure advanced industrial processes, technologies, know-how, IP and consumer brands to bring back to the China market is of equal strategic importance, both to individual buyers and the economy as a whole."

However the state of the global economy is impacting foreign M&A buyers wanting to make a strategic purchase in China.  Uncertain economic conditions in the home markets of potential buyers has contributed to foreign M&A activity in China slowing by 11% in 2011 to 482 deals, falling most notably in the second half of the year after a rebound in 2010.