Outlook for 2017 dim amid uncertainties: experts
Chinese investment into Western countries and regions saw a significant growth in 2016 despite rising regulatory obstacles to merger and acquisition (M&A) deals involving Chinese companies, as corporate China continues a global shopping spree in search of better investment opportunities, a report showed on Tuesday.
Total Chinese direct investment into North American and Europe more than doubled in 2016 to a new record of $94.2 billion, according to the report from U.S. law firm Baker McKenzie LLP that was sent to the Global Times. That comes even as 30 deals worth an unprecedented $74 billion were canceled in the year, the report said.
North America attracted about $48 billion Chinese investment, increasing 189 percent year-on-year and, for the first time since 2013, surpassing the $46 billion Chinese FDI into Europe, the report showed.
The rise in Chinese investment into Europe and North America was in line with a trend of Chinese companies going overseas in search of more lucrative investment opportunities, as such opportunities have been squeezed by a slowing economy back home, said Wang Jun, an analyst at the China Center for International Economic Exchanges.
"There are just not many opportunities with good return prospects in the domestic market … and the advanced economies in Europe and North America are still very attractive to Chinese capital," Wang told the Global Times on Tuesday.
He said the fast growth of many Chinese companies, particularly private ones -- which are facing even tougher conditions at home - in recent years is also driving them to expand on a broader world stage.
In 2016, 70 percent of the Chinese investment into Europe and North America came from private companies, a trend that signals the rise of corporate China in the world economy, according to the report.
Another highlight was that Chinese investment into the U.S. rose almost 200 percent year-on-year to $45.6 billion in 2016, with California attracting most of the money and other states, including Kentucky, Illinois and Minnesota, seeing major investments, the report said.
However, although 2017 could be another strong year for Chinese investment due to pending transactions, including a record $43 billion deal for a Chinese company to acquire Syngenta, the outlook is clouded by rising political and regulatory obstacles, experts said. The Syngenta deal is still facing scrutiny from the U.S. authorities.
"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 U.S. and Europe,"Michael DeFranco, global head of M&A at Baker McKenzie, was quoted as saying in the report.
Particularly in the U.S., deals involving Chinese companies will likely face even tighter scrutiny from the new administration of President Donald Trump, who has taken a tough stance on China, Wang said.
