The confidence of Chinese businesses fell sharply to a seven-year low in the second quarter. The number of Chinese respondents who expressed optimism outpaced those who were pessimistic by only 4% in the April-May period, significantly down from 25% in the first quarter, said Grant Thornton, a global auditing firm. It is the lowest since the firm started compiling China data in 2006. 40% of respondents cited an uncertain economic outlook as most threatening to their business, and fewer firms said they will increase funds in manufacturing and research in the next 12 months. “We hope the government could do more to reduce financing cost especially for small businesses to help them survive in the market,” said Xu Hua, Partner at Grant Thorton China. The survey, released after China’s exports in June posted the first annual drop since January 2012, covers 12,500 businesses annually in 44 economies, the firm said.

China has become the world’s third-largest country doing mergers and acquisitions in Africa, favoring the oil and gas sector, according to a report by international law firm Freshfields Bruckhaus Deringer. The country made 49 M&A deals totaling USD20.8 billion in Africa since 2003, following the United Kingdom with USD30.5 billion and France with USD30.47 billion. The value of African inward investment has tripled in the last 10 years reaching more than USD182 billion, up 214% in 2012 compared with 2003. “Africa’s rapid pace of growth makes it an obvious investment partner for China in many jurisdictions,” said Rob Ashworth, Freshfields Asia’s Managing Director. Chinese dealmakers favor the natural resources sector with USD8.1 billion invested in oil and gas across three deals and USD6.7 billion invested across 19 deals in metals and mining over the last 10 years, and their preference for these sectors will likely continue, said the report. Globally, there were 1,190 M&A deals totaling USD87.6 billion done in Africa over the same period. South Africa, Nigeria and Uganda became attractive destinations for Chinese investors with 23 deals totaling USD16.4 billion, said the report. One of the largest deals was the China-Africa Development Fund’s acquisition of a stake in Misr Refrigeration and Air Conditioning Manufacturing Co, a Cairo-based manufacturer of refrigerators and air conditioning systems, from the Barakat Group, for USD5.6 billion in 2010. As of this year, over 2,000 Chinese companies have invested in Africa. Apart from the traditional big SOEs – such as PetroChina Co and Aluminum Corp of China – that are significant investors in the energy and mining sectors, private Chinese companies have in recent years become a key driving force, the China Daily reports.

Gabon has taken the exceptional step of withdrawing the right of Addax Petroleum, a subsidiary of Sinopec, to exploit an oilfield in the country. Production at the southwestern Obangue oilfield, totaling 9,000 barrels per day (BPD), has been transferred since the end of last year from Addax to the new state-run Gabon Oil Co (GOC), set up in 2011. Officially, the Chinese firm is being sanctioned for failing to meet “contractual obligations”. Gabon’s complaints against Addax include “bad management”, “instances of corruption,” “shortfalls in the respect of the environment” and dodging taxes on oil exports. “After several months of fruitless negotiations, we decided definitively to withdraw the Obangue field from Addax Petroleum,” Oil Minister Etienne Ngoubou said. The incident is the first of its kind in Gabon and such measures against well-established firms such as Addax, which has operated in the central African country since 1996 and is the fourth oil producer there, are rare. Since it was bought by Sinopec in 2009, Addax has been exploiting five oil deposits on the basis of shared production with the Gabonese state, amounting to 23,000 BDP. The Sinopec subsidiary has responded by accusing Gabon of undue harassment and has taken the dispute to the International Chamber of Commerce in Paris. No date has been set for the ruling. Addax states that it wants to go on working in Gabon, which accounts for between 15% and 20% of its global production, although the Oil Minister has threatened to withdraw a second permit for the Tsiengui oilfield, also in the southwest, “if they don’t make any efforts” within 15 months, the South China Morning Post reports.

Ping An Insurance Group agreed to purchase the Lloyds Building in London from Commerz Real, a German closed-end fund, for GBP260 million. The transaction represents the first purchase by a Chinese insurance company in Britain. “This is a potentially landmark transaction, given it is the first by a Chinese insurance company overseas,’’ said Jon Crossfield, Director at Savills’ Central London team. “It is a high profile and confident entry to the market for them and further illustrates the dominance of overseas investors in London at present.” The Lloyds Building, a landmark property, is home to the world’s leading insurance market and leased entirely to the Society of Lloyds on a lease expiring in 2031. The building is located in the City of London and was bought by Commerz Real in 2005 for GBP231 million. “Prime net initial yields in the City of London are around 5%, so this building has traded just over 6%,” said Ben Cook, head of British inward investment at property consultancy DTZ in London. Robert Ciemniak, Chief Executive of Real Estate Foresight, a consultancy that provides analysis of Chinese property markets to investors, reckoned a 5% return in Beijing and Shanghai would require strong rental growth to underpin it. There is limited supply of A-grade offices in central business districts in Beijing and Shanghai for mainland insurers to invest in. “I believe that other mainland insurers will likely follow suit. Asset prices in some European countries have dropped a lot and are at bargain levels now,” said Chen Xingyu, Analyst with Phillip Securities in Shanghai.

Premium office rents in China’s first-tier cities have softened but remain high, while rents in second-tier cities are under pressure, according to a report by Cushman & Wakefield (C&W). Rents for grade A office buildings in Beijing, a barometer of China’s commercial property market, retreated by 1.5% quarter-on-quarter in the second quarter to CNY514 per usable square meter, according to the report. Rents for such space in Beijing have been easing since last year. Nationwide, Beijing’s grade A offices are still the most expensive, followed by those in Shanghai, which in the second quarter stood at CNY405 per usable sq m. Zhang Ping, Director of Cushman & Wakefield’s Beijing research operations, said the decline in Beijing office rents reflects the broader economic slowdown and sluggish demand from multinationals, which are the major tenants of China’s premium offices. Beijing has already bid farewell to the time when premium offices were in severe short supply and rents skyrocketed. Zhang said that in 2011, office rents in Beijing grew at an annual rate of 73%. The capital’s average rent level ranked fifth globally that year, exceeding Manhattan’s, but almost stopped rising in 2012, with annual growth of just 3.2%, and the city’s rent level dropped to the seventh worldwide. The report said office supply in first-tier cities remains tight, as no sufficient premium office is expected to be available for companies in the next few years. Average vacancy rates in first-tier cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, stood at 5% to 7%, while the average vacancy in 20 Chinese major cities monitored by C&W stood at 11%. C&W said total inventory of China’s grade A offices stood at nearly 34 million sq m at mid-2013. It estimated in the next three years, 58 million sq m of new offices will become available, of which about 19 million sq m will be in first-tier cities. While markets in first-tier cities face short supplies, second-tier cities’ office buildings are abundant, if not oversupplied, as developers have been flocking to these cities for potential growth. “Pressure is especially high in Qingdao, Chongqing and Chengdu, where vacancies are well above 30%,” Zhang said.