Chinese investment in US hits record $6.5 bn in 2012

Jan 02, 2013 12:00 AM

China has invested a record $6.5-billion in various acquisitions and greenfield operations in the United States covering a variety of industries signifying the world's second-largest economy's growing appetite for overseas assets.

The investment, which has grown from a mere $11 million in 2000 to $6.5 billion in 2012, was also up 12 per cent from $5.8 billion in 2011.

China's cumulative investments in the US have reached $22.6 billion, according to a new report published by New York-based Rhodium Group, which closely tracks Chinese investment in the US.

Most lucrative investment destinations include sectors such as fossil fuels and chemicals, hospitality and real estate, electronics and information technology and industrial machinery.

''This new record reflects both the growing determination of Chinese firms to expand overseas and the attractiveness of US markets and assets to these investors,'' the report said.

Today Chinese firms already employ 29,000 people in the US, up from less than 10,000 just five years ago.

The deals materialised in 2012 include oil giant Sinopec's $2.5 billion stake in Devon Energy, auto parts maker Wanxiang's $420 million in GreatPoint Energy and theatre operator Dalian Wanda's $2.6 billion purchase of US theatre chain AMC Entertainment.

Acquisitions awaiting regulatory clearances suggest continuation of the trend in 2013. In a major deal last month, a Chinese consortium agreed to by 80-per cent stake in AIG's aviation leasing unit ILFC for $4.2 billion.(See: Chinese consortium to buy 80 % of AIG's aircraft leasing unit ILFC for $4.23 bn)

Other deals anticipated include Wanxiang's acquisition of non-defence business of battery producer A123 Systems through a bankruptcy auction, and genome sequencing centre BGI Shenzen's buy of Californian life science firm Complete Genomics.

''In short, we are in the midst of a structural growth story that will transform the China-US investment relationship from a one-way street into a two-way street,'' the report said.

The recent growth of Chinese investment is even more remarkable in the light of an otherwise bleak FDI picture in the US. FDI in the US that was above $300 billion in 2008 dropped to about half in 2009 following the global financial crisis. Although it recovered to the level of around $200-250 billion in 2010 and 2011, the investment is expected to drop in 2012 due to global economic slowdown and the European debt crisis.

Compared to five years ago, Chinese FDI investment in the US has grown over 300 per cent while FDI flows into the US from Canada and Europe have reduced by 75 per cent and 49 per cent respectively, according to the US bureau of economic analysis data.

In comparison, Chinese FDI investment in Europe has topped $10 billion for the second year in a row, almost double of what the US received over the past two years.

Europe's greater attraction can mostly be explained by commercial opportunities, including privatisation programmes and troubled industrial assets, but different national security sensitivities and the perception that Europe is more welcoming to Chinese investment than the US did play a role too, the report said.

 

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