Chinese investment in the US has long been a subject for debate and perhaps unsurprisingly there are those who feel it is a political ploy to enable Beijing to gain a significant toe-hold in America’s economy by the acquisition of companies and real estate assets.
There are others who suggest that China has saturated their own internal market and has created excess capacity across many sectors and therefore they see diversification into other markets, such as the US, as a sensible investment strategy.
What should not be overlooked is that Chinese investment and acquisitions within the US are subject to regulatory scrutiny and on occasions such deals have been knocked back. One should also not overlook the importance of what foreign investment, such as China’s, brings to the US economy.
Ironically, the rise of China’s industrial sector was a contributory factor, in recent years, to the loss of production and manufacturing jobs in the US. However we are now seeing that Chinese investment is bringing those jobs back to the US. This is as clear an indication of the reversal of economic strategies of both nations and offers insight into one future direction of the US from a manufacturing and production perspective.
Asia Society and the Rosen Consulting Group estimated that between 2010 and 2015, Chinese investors spent about $93 billion on American residential property, with total expenditure rising annually by around 20%. Furthermore, with that five year period, Chinese companies acquired about $17 billion in existing US office buildings, hotels and other commercial buildings. By the end of 2015, the report concluded that China had spent $350 billion in U.S. real estate holdings and investments, and investment in Chinese-backed construction projects in the U.S. stood at $15 billion.
2016 has seen an acceleration of Chinese acquisitions which has already doubled in monetary value, than the total seen in 2015 as depicted in the graph below, supplied by Jim Willie, courtesy of the Hat Trick newsletter, www.goldenjackass.com
Some notable Chinese deals in 2016 include:
- A pending $6 billion acquisition by Chinese shipping company Tianjin Tianhai Investment Company for US technology distributor Ingram Micro Incorporated
- Anbang Insurance Group’s pending $6.5 billion bid to acquire Strategic Hotels
- GE sold its appliance business to the Chinese white good manufacturer, Qingdao Haier for $5.4 billion
- China’s property and entertainment giant Dalian Wanda acquired leading Hollywood production company, Legendary Entertainment for $3.5 billion
- CITIC Capital Holdings, Hua Capital Management and Goldstone Investment Co. acquired Omnivision Technologies for $1.9 billion.
- Ningbo Joyson Electric Corp. bought Key Safety Systems, an air-bag maker, for $920 million
- Chinese investors bought Media.net, ad-tech firm, for $900 million
There have been over 50 Chinese deals completed so far in 2016, largely driven by private sector acquisitions in services, technology and consumer-oriented assets as well as Greenfield projects in real estate and manufacturing.
However it is not all plain sailing for China. In 2015, Tsinghua Unigroup offered $23 billion for Micron but was refused although it is believed that another offer for the California chipmaker is likely. Tsinghua did however subsequently pay $3.8 billion for a 15% stake in Western Digital, the hard-drive manufacturer. Tsinghua’s ventures into data storage and chip markets are seen as of strategic importance to Beijing.
In February 2016, Fairchild Semiconductor declined a $2.5 billion Chinese acquisition bid because it feared the Committee for Foreign Investment in the United States (CFIUS) would block such a deal. In April of this year, Anbang Insurance abruptly withdrew a $14 billion bid for Starwood Hotels and in May, Zoomlion Dropped its $3.3 billion deal for U.S. Crane Maker Terex.
Clearly all such deals are fraught with difficulties, not least impeded by “special-interests” or better known as protectionism. Current US-Chinese relations are fragile and there is a genuine risk that China could take retaliatory action which would be damaging to US businesses, trade relationships and bilateral ties.
In conclusion, this author considers that China is furiously dumping US Treasuries and acquiring hard assets which it feels will derive the most benefit for China. However, there are clearly benefits for the US economy as they are investing heavily in US companies, sometimes saving them from bankruptcy, but also looking at redeveloping the US’s manufacturing and production base as it rotates its own economy as we move towards the new paradigm.
The US is by no means the only nation where they are making major investment deals, another notable entry is Australia and has been for many years there already. The links below demonstrate that developments are both global and note that these articles are all within the last few days. The pace of change shows no sign of let-up.
I will also leave you with Jim Willie’s recent view on Chinese acquisitions in the US economy, courtesy once again of the Hat Trick newsletter.
$$$ CHINA’S REVIVING THE AMERICAN HEARTLAND, ONE LOW WAGE AT A TIME… THE CHINESE ARE ACQUIRING US-BASED COMPANIES AT AN EXTREMELY RAPID AND ACCELERATING CLIP… SO FAR THEIR 2016 PURCHASE VOLUME IS DOUBLE ALL 2015… MORE CONVERSION OF USTBONDS INTO HARD ASSETS AS CHINESE TAKING OVER THE US MANUFACTURING SECTOR STEP BY STEP…
THE CHINESE ARE SAVING BUSINESSES, INVESTING IN THEM, AND AVOIDING BIG JOB CUT EPISODES… THE PAYSCALE IS LOWER, FRINGE BENEFITS LESS, BUT ECONOMIC DEVELOPMENT IS OCCURRING… THE EARLY STAGE OF COMMERCIAL COLONIZATION HAS BEGUN. $$$