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According to Wall Street Journal website, a new American Enterprise Institute (AEI) research finds that, through June, Chinese firms have invested in the US for nearly $29 billion, breaking the previous full-year record of $18 billion in 2014. The data comes from AEI’s database China Global Investment Tracker (CGIT), which includes all verifiable investment and constructions transactions worth $100 million or more. （To view the full report, click here.）
According to the report, as more than $80 billion invested globally in the first six months of 2016, China will easily break its national mark for annual outbound investment. The surge has the following interesting features:
- Almost all of the money is going into mergers and acquisitions, rather than into building new facilities.
- For the first time, overseas investment by Chinese private enterprise is larger than that by state-owned enterprises, counting 51.6% of the total investment.
- The U.S. as a destination is becoming more and more popular. It is the largest recipient of Chinese funds both to date in 2016 and in total.
So far in 2016, two-thirds of the increase in Chinese investment over last year and one-third of total Chinese investment went to the U.S. Private Chinese firms making American acquisitions range from Haier’s $5.4 billion outlay for General Electric’s appliance business to the LeEco’s $250 million acquisition of land from Yahoo. Private companies have led Chinese investment in the U.S. for several years, but nothing close to this extent.
Part of the reason America is attractive is the variety of options: Foreign firms wishing to spread their portfolios across more industries can find anything they want here. In China’s case, acquisitions have been made in the film industry, enterprise technology and New York City property, among other areas.
Another factor the report mentioned is the weakness and uncertainty in the value of the yuan. With this push, private Chinese investors simply want to get money out of their home market. For example, the interest of Chinese firms in outbound investment was strongest in January and February, right after the yuan faltered, speeding up deals such as Ningbo Joyson’s purchase of air-bag maker Key Safety Systems.
The Committee on Foreign Investment in the United States (CFIUS)is an inter-agency committee of the US Government that reviews the national security implications of foreign investments in U.S. companies or operations, and ensures that foreign acquisitions don’t undermine national security. As the Chinese investments increase, the committee will review and could possibly block several Chinese bids this year, but that is unlikely to discourage investors. Many Chinese firms still want to enter the American market.
To help the Chinese company invest in the US more efficiently and better deal with CFIUS investigation, China General Chamber of Commerce would deliver relevant instructional report in the second half of 2016, please stay tuned.