Due to short-term economic uncertainties, deal volumes involving China-based acquisition targets fell to a decade low, a recent KPMG survey shows.

Rupert Chamberlain, head of transaction services, KPMG China, comments: "The dynamics of China M&A continue to change rapidly leading to volatility in quarter-on-quarter data. However, China remains an extremely important market globally despite short-term concerns in some specific areas, it cannot be ignored longer term."

Cross-border acquisitions between developed-market acquirers and China decreased to 52 deals in the first six months of 2014, down from 78 a year earlier, according to the latest edition of KPMG's High Growth Markets International Acquisition Tracker. Hong Kong remains the largest acquirer in China's deal flows with 32 out of 52 deals.

The KPMG survey includes data from completed transactions where a trade buyer has taken a minimum 5% shareholding in an overseas company. It tracks deal flows between 15 developed economies and 13 emerging economies, excluding deals backed by government, private equity firms or other financial institutions.

The survey also finds that China remains the most active high growth market acquirer. While its acquisition in developed markets dropped 35.2% in the first half of 2014 to 35 deals, it fared better than Southeast Asia (24 deals) and India (22 deals) which rank at second and third places.

Additionally, the survey finds that Hong Kong companies continue to be key acquisition targets for China, while Australia and the US are additional top choices.

In terms of sectors, natural resources and energy are key outbound targets, driven by rising demand in China, KPMG data shows. Agribusiness and food sectors continue to see increased activities. Additional deals were also recorded in the telecom and technology sector as China continues to strengthen its presence in this area.

Chamberlain points out: "Chinese companies continue to search for quality overseas acquisition targets to garner the resources and skills needed to enable them to compete domestically and on an increasingly global economic stage. In other words, although current well-versed issues relating to the domestic economy have slowed down cross-border M&A, particularly for corporate investors, it is inevitable that we will see a rebalancing of inbound, outbound and domestic deals as the market matures."