Chinese direct investment in the US economy is set to reach a new high this year due to a wave of deals announced in early 2016. But experts say the pace is already slowing as politicians and regulators increase their scrutiny of Chinese details.
Chinese companies are expected to invest $20 billion to $30 billion in the US in 2016, mainly through mergers and acquisitions, compared to a record $15 billion last year and $11.9 billion in 2014, according to a report to be published Tuesday by research firm Rhodium Group and the National Committee on US-China Relations, which promotes cooperation between Beijing and Washington, Yahoo reported.
The investment is starting to attract attention, including among Washington regulators and politicians in the 2016 campaign season. Many voters are expressing deep mistrust of US economic and trade ties as Donald Trump criticizes moves by China, Mexico and Japan.
Despite its ascent to the world’s second-biggest economy, China has so far invested very little in the US compared with the UK, Japan and other advanced economies. But the annual amount is growing rapidly, and China is plowing less into commodity-rich developing countries as Beijing seeks to shift the economy toward technology, services and greater consumer spending.
“They’re scrambling to upgrade their technology, they’re scrambling to build household brands quickly,” said Thilo Hanemann, economist at the Rhodium Group. “We’re seeing a big shift in Chinese investment from the developing world and emerging markets to high-income markets including the US, Europe and Australia.”
The first quarter saw Chinese bids for US companies at a dizzying pace, in part an effort to diversify abroad after the country’s market turmoil last August and concerns about a shift in the dollar-yuan exchange rate. Now, some US acquisition targets are more worried about the ability of Chinese companies—many controlled by the state—to get the green light for foreign deals and obtain financing, Hanemann said.
Without major new deals—such as Anbang Insurance Group Co.’s unsuccessful bid for Starwood Hotels & Resorts Worldwide Inc.—the pace of acquisitions and “greenfield” investments could ease off for the rest of the year, resulting in a “conservative” estimate of $20 billion to $30 billion for 2016, Hanemann said.
