Bloomberg reports: "China's overseas acquisition streak seems to be coming to an unhappy end. Outward direct investment fell by 46 percent in the first half of the year, due partly to tightened capital controls and partly to new restrictions on 'irrational investments.' But the authorities should be asking a more fundamental question: Why do China's companies struggle so much overseas? Typically, companies that expand abroad -- through either trade or investment -- are the best and most productive in their industry at home... In China, this pattern doesn't hold. Productivity and profitability often matter less than politics. The government regularly publishes a list of industries it wants companies to invest in, and multiple regulators must approve every aspect of a proposed deal, from the purchase price to whether firms can obtain foreign currency. Reliably, companies planning to invest in preferred industries get the most approvals. And when state-owned banks determine which deals get financing, they tend to favor those that will advance government objectives. This process creates a range of problems... The most pernicious problem is that it encourages companies to overextend themselves. Sometimes, this means simply paying too much for foreign assets, as when a troubled Chinese company recently bought an Australian port for more than twice what analysts said it was worth. But a bigger concern is debt. China's companies have amassed a staggering $162 billion of total debt while expanding overseas, sometimes in seriously questionable deals... Regulators are growing increasingly nervous."