When it comes to buying binges, China has scoured the world for investment opportunities. But one “mega-mall” with an array of high-tech goodies on offer has been gradually closed to the country’s unwanted advances.
Emblazoned across its entrance is The United States of America and on the bolted doors is a simple message, the sale is over.
To illustrate the problems Beijing is facing since President Donald Trump moved into the White House in 2017, you just have to glance at the foreign direct investment numbers from China to the US.
Last year, they went into freefall, plummeting 35% from 2016 to US$30 billion. Rising trade tensions, with Washington’s decision to block “sensitive takeovers,” and curbs on capital outflows were the main reasons behind the dramatic decline, a joint study by legal firm Baker McKenzie and consultants Rhodium Group highlighted.
“Letting Chinese corporations acquire American companies, especially energy or technology-based companies [is considered] one of the biggest threats to rebuilding American manufacturing,” said Michele Nash-Hoff, the entrepreneur and author of For Profit Business Incubators and Can American Manufacturing be Saved?
It was a similar story in Europe, even though investment by Chinese companies jumped to $81 billion last year.
A closer look showed that figure was inflated by the delayed completion of China National Chemical Corporation’s $43 billion takeover of Swiss agribusiness giant Syngenta in 2016. When that deal was taken out of the equation, the overall FDI figure was $38 billion, a drop of 22% in 2017 from the previous year, the report showed.
“Chinese investors canceled or withdrew 19 announced deals worth more than $12 billion in North America and Europe in 2017 … more than two-thirds caused by overseas regulatory intervention,” the Baker McKenzie and Rhodium Group report stated.
The rapid reduction in foreign investment is consistent with Beijing’s numbers. Han Yong, a senior official at the Ministry of Commerce, announced earlier this week that Chinese companies had invested $129 billion into more than 6,000 overseas firms last year, down by 29% compared to 2016.
Growing regulatory pressure in the US scuttled Zhongwang Holdings’ $2.3 billion acquisition of Aleris in November, as well as the recent $1.2 billion takeover by Alibaba affiliate Ant Financial Services for MoneyGram, the money transfer giant.
In another major decision earlier this month, Huawei was blocked from linking up with AT&T to sell its smartphones in the US. The world’s third largest player behind Samsung and Apple is China’s market leader but is now looking to expand its global footprint.
After the joint-venture collapsed, Huawei decided to continue selling its products through online outlets, such as Amazon, which account for only 10% of the US market. “[The regulator] has been busier than ever,” said Rod Hunter, a Baker McKenzie partner in Washington.
Still, Chinese companies did expand rapidly in the United Kingdom. Investment more than doubled from $9.2 billion in 2016 to $20.8 billion last year, despite uncertainties over Brexit. In the next 14 months, Britain is poised to leave the European Union, which is the world’s largest single market, after a referendum in 2016.
“We have seen a steady increase in Chinese FDI into the UK, culminating in last year’s record high,” said Tim Gee, a London mergers and acquisitions partner at Baker McKenzie. “Weak sterling and a renewed confidence [among] Chinese investors have been factors in driving much of this activity.”
The key deal last year was the $14 billion acquisition of warehouse company Logicor by China Investment Corporation, which is a sovereign wealth fund. At the time, there were murmurs of disquiet about the takeover, but the investment was finally pushed through.
“Unlike the EU and the US, the UK has not signaled any meaningful toughening of foreign investment screening and the door is very much open to foreign investors,” Gee said.
Yet concerns are now growing that the UK is “ill-equipped to assess the legal” implications of this investment avalanche.
A study by the Henry Jackson Society, an influential conservative British policy think tank, argued that while Chinese moves should be welcomed, the financial backing of the UK’s digital sector and infrastructure projects were not without risks.
“Indeed, there is a trend in Europe, the US and, now, Australia of checking China’s investment surge,” John Hemmings, the director of the Asia Studies Centre at the Henry Jackson Society, told the Royal United Services Institute for Defence and Security Studies in the UK.
“Security experts argue that such investments should be monitored and – on occasion – blocked from key parts of the British economy,” he added.
In China’s game of revolving doors, it might become even more difficult in the next 12 months to spot the access signs.
Chinese are wonderful gamblers.
Investment is a gambling game that excites Chinese as they so much yearn for Western money and lifestyles.
Chinese investment belongs in China, where it is so much needed.
World class is an easy word to use but much harder to attain.
Most Chinese made products are of mediocre quality but a low price.
Really good quality comes at a very high price.
We get what we pay for China.
Belt and Road is the same as Shield and Sword.
Having China make it is a risky strategy, China is war like now.
This may be a trap for the unwary.
China’s regime, needs trade but it also wants foreign lands and resources, for profit.
Chinese trade is cunning and sneaky.
India is not happy with the Chinese regime at its back door.
Joseph Wang, you ‘history lesson’ must come directly from a low level in the CCP Ministry for fake news.
I think it is a little too late for genetic counselors.
CCP policy under various morons, has made for a nation of only boys.
Maybe that is their sneaky plan, gay marriage for all of China.
But this plan is a little short sighted, I think. 😀
Good to see investment going to the Chinese people.
However the CCP has, in the past, given all the benefits of China’s westernisation, to only the upper class.
Good to see China making use of western technologies.
Without western technological know how, Chinese would still be fighting each other and having no trade. Like in the bad old days.
Keep up the good westernisation China.
Oh you can ditch that CCP regime, whenever you are ready. 😀
Chinese people have a terrible weakness for gambling.
This is greatly exacerbated by a strong belief in being very lucky.
CCP in China is not so lucky.
Monopolies don’t do anyone anygood.
That is how a centralised, one party, one way of thinking regime works.
Competition is the way to lift performance or go bust.
Chinese quality needs competition to improve.
CCP needs a competitive political landscape to democratise, liberalise and reward the hard working Chinese people with more freedom and less imprisonment.
Open your borders China.
Let the CCP taste the winds of change along with democratisation of China.
The CCP relies on fear to control China.
There is no need for this anymore.
Fear hurts people.
Look at all the hurt Chinese operatives watching me write this, they hate freedom.
I do not know how this will play into FDI into the US but ever since Trump lowered Corporate taxes from 35% to 20% various American companies plan to repatriate billions now stored in foreign banks. Up to 2 to 3 Trillion dollars of American Coroporate profits have been parked in foreign banks mainly due to that high tax.
One article stated that Apple is planning to repatriate around 252 billion dollars with plans to create 20 thousand new jobs. Other companies are doing the same.
Wood Wu: American system is not working in the 21st century. They only make wars and cause division to survive. America is no longer competitive. They are trapped in wasting money in the military industrial complex. America had the 20th century. 21st century belongs to China. China’s rise to super power is unstoppable.
I believe India has to learn from China rather than being jealous. India has to work together with China to get their people out of extreme poverty. I think India should copy Chinese economic and development model.
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