Baker McKenzie: Chinese investment tripled in US, doubled in Europe

Combined Chinese direct investment in the advanced economies of North America and Europe more than doubled in 2016 to a new record of USD94.2 billion as China continued its transition to a new growth model, in line with its rapidly maturing economy.
FDI flows rose a combined total of 130% from the previous benchmark of USD41 billion, set in 2015. Acquisitions drove activity, accounting for 97% of FDI value.
For the first time since 2013, Chinese investors poured more money into North America (USD48 billion, up 189%) than Europe (USD46 billion, up 90%), with the US accounting for 94% of the North American total. This was against a backdrop of global Chinese outbound investment hitting a new high in 2016 of almost USD200 billion.
Privately-owned Chinese companies led the trend, outpacing investment by state-owned enterprises to close deals accounting for 70% of the total, signaling the continued rise of corporate China in the global economy.
However, the outlook is mixed as 2016 also saw 30 cancelled deals (20 in Europe, 10 in US), worth an unprecedented USD74 billion. Whilst 2017 is likely to be another strong year as previously announced deals reach financial close, the number of newly announced Chinese acquisitions in Europe and North America has dipped since an exceptional first half of 2016.
Michael DeFranco, global head of M&A at Baker McKenzie, said: “Well over half of all Chinese direct investment into Europe and North America since 2000 has taken place in the last three years, marking the continued influence of globalization and the rapid development of China’s economy. The deal pipeline is strong in both Europe and North America, but political and regulatory uncertainties are weighing on the outlook. A short term slowdown in new deals is likely in 2017, driven both by China’s temporary measures to slow capital outflows and tougher screening of inbound deals in the US and Europe.” The scale of recent investment, counterbalanced by growing numbers of troubled transactions, is revealed by data previewing Baker McKenzie’s forthcoming report with Rhodium Group, which is unique in analyzing patterns of Chinese investment in the two regions’ high-income economies. The full report will be published later in February.