Chinese companies’ cash heading for Europe, North America drops to five-year low as capital controls, scrutiny abroad puts the brakes on investment
- Chinese foreign direct investment came to US$3.3 billion in North America and US$9 billion in Europe in the first half, down by a fifth from a year ago
- Firms face tighter capital controls at home and tougher scrutiny from foreign governments and regulators
Chinese companies invested just US$12.3 billion in the advanced economies of Europe and North America in the first half of the year, the lowest amount since 2014 and almost a fifth less than last year, according to the law firm Baker McKenzie.
The decline has been almost entirely attributed to state-owned firms turning their backs on both regions, a research report the firm released on Thursday found. Private companies accounted for 94 per cent of the total spent in the first six months.
China’s overseas spending, once rampant, has been curbed drastically by the introduction of strict capital controls intended to stop money leaving the country.
At the same time Chinese companies have faced increasingly tough scrutiny abroad, particularly under US President Donald Trump’s administration, with many major deals being rejected on national security grounds.
North America did see an overall increase of 19 per cent in Chinese investment, but it was largely because it followed 2018’s exceptionally low base. Moreover, the increase was entirely in the US, as investment in Canada remained flat.
By the end of June, there had been US$3.3 billion in foreign direct investment (FDI) transactions made by Chinese firms in North America and US$9 billion in Europe, the report showed.