Monday October 14, 2019

CHINESE INVESTORS FAVORED NORTH AMERICA IN 2012

January 15, 2013

 

 

Recent reports detail a growing interest among Chinese investors toward American industries. According to the Rhodium Group, the worth of Chinese investments in the U.S. in 2012 increased 12% from 2011 to $6.5 billion. While North America became the top destination for Chinese investors in 2012, this development is predicted to be temporary as Chinese enterprises have established a pattern of moving collectively from region to region. It is believed the geographical shift of Chinese investors from African and Latin American to North American markets was primarily sparked by the 2008 global financial crisis.

The energy sector—particularly oil and gas extraction—attracted the greatest amount of Chinese investments, exemplified by Sinopec’s $2.5 billion investment in the oil and natural gas exploration and production company Devon Energy. The utilities, real estate, and hospitality sectors also received significant attention from Chinese investors. Infrastructure projects are seen as an area for potential growth and advantage for Chinese investors if various complexities involving U.S. market boundaries and the balance of power between the private sector and government departments can be resolved.

Despite its record year, the overall value of China’s investments only accounts for approximately 1% of total Foreign Direct Investment in the U.S. However, the growth of Chinese investments in 2012 was particularly significant as overall investment in the U.S. declined sharply, particularly due to continued financial uncertainties in Europe. China is one of the few countries whose investments in the U.S. grew over the past five years, while FDI flows from Canada and Europe were down by more than 50% over the same period.

Although investments grew in 2012, Chinese companies continued to express concern regarding a perceived lack of openness toward Chinese investors in certain industries. Several high-profile cases in 2012 emphasized the challenges still faced by potential Chinese investors. Some of the more prominent examples of these challenges include the U.S. House Intelligence report which questioned the motives and connections of telecommunications firms Huawei and ZTE and the Presidential order of a Chinese-owned company to divest itself of four Oregon wind farm projects that were located near a military base. At the close of high-level trade talks in late December 2012, Chinese vice premier Wang Qishan remarked that Chinese wanting to invest in the U.S. should not have to undergo “political background checks”, adding that Americans were not asked similar questions about their political affiliations when investing abroad.

According to the Heritage Foundation’s China Global Investment Tracker dataset, the U.S. has experienced the second highest rate in dollar value terms of so-called troubled transactions with China, which they note is typically a result of domestic political reasons within the U.S. Their report suggests that such distrust of Chinese state enterprises will serve as a check on the rate of growth of investments. Despite the concerns regarding and challenges facing potential Chinese investors, the Rhodium Group notes that growing Chinese investment should spell benefits for local American economies, particularly in the form of employment, reporting that Chinese firms currently employ 29,000 people in the U.S—an increase from 10,000 just five years ago. Continuing into 2013, the new year has already seen the first investment by a private Chinese company into shale gas exploration in an American oil field. Thus, despite the challenges, it is clear that the enthusiasm of Chinese investors is continuing into 2013.

 

For further information on Chinese investments in the U.S., please see the following news sources:

Caijing -“Chinese Investment to the U.S. Speeds Up

Caijing – “Top Official Demands Cease of ‘Political Checks’ from US

China Daily – “Chinese company buys into US shale oil and gas assets

China Daily– “Outbound investment strategy needs to be revamped

Financial Times – “Beijing criticizes US ‘political checks’

The Heritage Foundation – “China’s Global Investment Rises: The U.S. Should Focus on Competition

Rhodium Group – “Chinese Investment in the U.S. in 2012

Rhodium Group – “Foreign Investment in China: A Tale of Two Statistics

The Wall Street Journal – “China’s Global Investments Climbing, But Troubled

 

For Chinese language commentary on Chinese investments in the U.S., please see the following news source:

Caijing – “提速对美投资


Compiled and edited by Catherine Beck.