Chinese investment in US falls, but big deals in the pipeline

PUBLISHED : Monday, 28 July, 2014, 4:26am
UPDATED : Monday, 28 July, 2014, 8:39am

Chinese investments in the United States fell year-on-year in the first half, but pending deals and the expected completion of the US-China Bilateral Investment Treaty (BIT) mean the figure for the year as a whole may rise substantially.

Chinese companies completed US$3.46 billion worth of deals in the US in the first half, including US$2.1 billion in the second quarter, according to the latest data from the Rhodium Group, a US consultancy. This was down from the US$4.7 billion worth of completed Chinese deals in the US in the first half of last year, according to Rhodium.

Supporting the trend, the Heritage Foundation, a US research institute, said China's investment in the US and the world contracted in the first half.

However, more than US$10 billion worth of Chinese deals in the US were announced in the first half, said Rhodium.

"Many of these deals are big strategic deals, especially in energy," Daniel Rosen, a partner at Rhodium, told the Asia Society in Hong Kong on Friday.

Among the confirmed and pending Chinese deals in the US announced in the first half, over US$6 billion were in the hi-tech sector, Rosen said, a big jump from the annual average mainland investment in the US IT sector of roughly US$1 billion in the previous four years.

Pending IT deals include Lenovo's planned acquisitions of IBM's x86 server business for US$2.3 billion and Motorola Mobility for US$2.91 billion, which are awaiting approval from the Committee on Foreign Investment (CFIUS), a US government body that reviews foreign acquisitions of US companies to ensure they do not pose a threat to national security.

In 2011, mainland telecommunications technology firm Huawei called off its attempt to acquire US server technology firm 3Leaf under pressure from CFIUS.

"Software and IT services are seeing explosive growth as Chinese companies want to be innovative," he said.

"CFIUS might be boxing out Chinese investments in hi-tech, but the numbers tell a different story. We're at a turning point where many more Chinese companies understand CFIUS is not a deterrent."

Separately, the US and China are working to reach an agreement on the main points of the US-China Bilateral Investment Treaty by the end of this year. If BIT is successfully concluded, it is estimated that total US investment in China would rise to US$100 billion by 2020, while total Chinese investment in the US would exceed US$100 billion by 2020 and create 330,000 jobs in the US, according to He Weiwen, co-director of the China-US/EU Study Centre at the China Association of International Trade.