As the focus of global economic growth rapidly shifts to the East, financial services (FS) mergers and acquisitions (M&A) in China, and Asia, are expected to accelerate in late 2011 and 2012. 

More than 75% of respondents from China indicated a transaction was actively under consideration or likely within the next 12 months, according to a new report from PricewaterhouseCoopers, 'Emerging Opportunities: Financial Services M&A in Asia 2011'. 

Chinese respondents to the PwC Financial Services M&A in Asia Survey 2011 are bullish about the prospects for M&A in their market, and are also upbeat about their own organisation's M&A plans for the year ahead despite the recent reduction in FS M&A deal value by almost 30% in the first half of 2011 compared to the same period in 2010. 

"Chinese institutions have mostly sat on the sidelines of global FS M&A since the crisis but as we enter into a new period of volatility there are signs that some may be tempted to enter the fray and pick up inexpensive but strategic assets," says Matthew Phillips, leader of financial services M&A, PwC China. 

"I do not expect a big splash in a retail play in Europe or the US, but I would not be surprised to see Chinese buyers being increasingly aggressive in deals involving wholesale funding such as capital leasing and project finance as well as those involving key emerging markets trading partners."

The survey of Chinese respondents indicates that their interest is likely to be close to home with 60% expecting activity to be domestic or within the North Asia region, a further 38% expecting deals within Asia to predominate in the next 18 months.  Only 3% felt that activity would be driven from beyond Asia.

Findings from the survey show that Chinese respondents are keener than the wider Asian sample to develop new lines of business via M&A.  They see corporate banking, investment banking, reinsurance and capital markets as the most attractive business lines. 

Interest in investment banking and capital markets is markedly higher amongst Chinese respondents than the rest of Asia indicating continuing interest in the domestic IPO market which has weathered recent volatility better than many other global financial centres.

On a region-wide basis, respondents once again cited Mainland China as the area likely to witness the greatest level of activity, reaffirming its position as the most attractive destination for inbound activity, followed by Hong Kong and Taiwan.