2/29/2016

Buying Up America


Chinese companies have been buying up foreign businesses, including American ones, at a record rate, and it's freaking lawmakers out.

There is General Electric's sale of its appliance business to Qingdao-based Haier, Zoomlion's bid for the heavy-lifting-equipment maker Terex Corp., and ChemChina's record-breaking deal for the Swiss seeds and pesticides group Syngenta, valued at $48 billion.

Most recently, a unit of the Chinese conglomerate HNA Group said it would buy the technology distributor Ingram Micro for $6 billion.

And the most contentious deal so far might be the Chinese-led investor group Chongqing Casin Enterprise's bid for the Chicago Stock Exchange.

To date, there have been 102 Chinese outbound mergers-and-acquisitions deals announced this year, amounting to $81.6 billion in value, according to Dealogic. 

That's up from 72 deals worth $11 billion in the same period last year.

And they're not expected to let up anytime soon. Slow economic growth in China and cheap prices abroad due to the stock market's recent sell-off suggest the opposite.

"With the slowdown of the economy, Chinese corporate companies are increasingly looking to inorganic avenues to supplement their growth," Vikas Seth, head of emerging markets in the investment-banking and capital-markets department at Credit Suisse, told Business Insider earlier this month.

A decade ago it was virtually nothing. Now, annual investment by Chinese companies in the United States exceeds American investment in China. 

“Chinese outward investment is the mother of all global trends,” Thilo Hanemann, director of research firm Rhodium Group, said at a recent event in New York sponsored by the Columbia Business School Asian Alumni Club.

Between 2005 and 2014, Chinese FDI global totals grew tenfold, from $12.26 billion to an estimated $120 billion. 

Purchases by state-owned enterprises, which dominated in the early years, are now eclipsed by those from privately owned Chinese companies, which is responsible for two-thirds of current investment.

To be sure, other countries spend far more in the United States than China does.

In fact, investment in the United States by China represents only .5 percent of the total US inbound investment flow. 

Still, the east-to-west trend is unstoppable, said Anthony Mak, who heads the Hong Kong Trade Development Council for the New York and Eastern US region.
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