Chinese direct investment in US and Europe falls by 73 per cent to a six-year low as firms face tougher scrutiny
- New investment screening rules abroad hit China’s outbound investment in 2018, with 21 Chinese acquisitions cancelled by foreign regulators
China’s direct investment into North America and Europe fell by almost three quarters in 2018 to a six-year low of US$30 billion, according to international law firm Baker McKenzie.
One of the main reasons for the huge drop was the high number of deals that were cancelled or blocked by foreign regulators amid heightened scrutiny of Chinese firms’ acquisitions.
Regulators pulled the plug on 21 Chinese takeovers last year, seven in Europe and 14 in North America, worth a combined US$5.5 billion, according to a report released by Baker McKenzie on Monday.
This led China’s outward foreign direct investment (FDI) in the two regions down sharply from US$94 billion in 2016 and US$111 billion in 2017.
The US was responsible for the lion’s share of the decline. Chinese companies invested just US$4.8 billion in the US last year, down 83 per cent from US$29 billion in 2017 and US$45.63 billion in 2016.
Unlike past major investors in the US, like Japan and South Korea, China is not a military ally of the US. Washington has therefore frequently pushed back against Chinese investments, citing national security concerns, particularly when it came to ownership of critical infrastructure, political and defence-related technologies.