China's deals in US to hit record

Research firm says investment in America set to soar in first quarter of next year

PUBLISHED : Monday, 17 December, 2012, 12:00am
UPDATED : Monday, 17 December, 2012, 5:30am

Chinese investments in the United States next year will surpass those this year, given the billions of dollars of deals expected in the first quarter, analysts said.

At least US$5 billion of Chinese investments were in the pipeline for the next three months, said Daniel Rosen, a partner at Rhodium Group, a US economic research firm.

Chinese investments in the US for the whole of this year were expected to amount to a record US$7 billion, up from about US$4.5 billion last year, he said.

"[Next year] is definitely going to blow 2012 out of the water," Rosen said at an Asia Society talk on Friday.

In the first nine months of this year, Chinese direct investments in the US totalled US$6.3 billion, according to Rhodium.

Another estimate by data provider Mergermarket said such investments reached US$11.53 billion between January 1 and December 14 - 4.32 times the sum in the same period last year.

"The value of Chinese acquisitions in the US is expected to rise next year, now that the new [Chinese] leadership has been ushered in," said Ben Scent, Mergermarket's China/Hong Kong editor. "The new leadership is more reform-minded and will push state-owned companies to do more deals overseas.

"Chinese companies will seek acquisitions of advanced technology companies in the US, as well as consumer companies with well-known brands."

California could attract between US$10 billion and US$60 billion of cumulative total Chinese investments by 2020, compared with US$1.3 billion to date, a Rhodium report said.

Rosen said that even investments by Chinese firms in sensitive US sectors such as aerospace are getting approved by the Committee on Foreign Investment in the United States, the government body with the power to block foreign investments on national security grounds. "If you think the US wants to keep Chinese investments out, this would never happen," he said.

Rosen said Chinese investments covered a broad range of US industries, including oil and gas, entertainment and hospitality, electronics, industrial machinery and real estate.

According to US official data, China's cumulative total direct investment was US$9 billion last year, much less than China's purchases of US$1.3 trillion of US Treasury debt. "There is really a good reason for the Chinese to diversify from low-return Treasury debt to higher-return foreign direct investment," Rosen said.