Why China's M&A crackdown makes sense

The Chinese government’s recent crackdown on outbound acquisitions may appear wrong-headed. Chinese government officials, who have long touted the country’s “going out” policy, are now complaining that executives are going out far too much.

But although China’s crackdown is hardly the stuff that free marketeers dream about, that doesn’t mean it’s not sensible. China is a country that has now accumulated plenty of experience in deflating bubbles before they pop. That is just what it appears to be doing with acquisitions.

Chinese companies have been on an unprecedented buying spree this year, announcing an eye-popping $218.6 billion of deals, according to Dealogic. That is more than...