China’s investments in the US are expected to hit a record high this year surpassing the previous level of about USD 5.7 billion despite various political and security concerns,says a study.
Chinese investment,or outbound FDI,in the US reached USD 3.6 billion in the first half of this year and is expected to cross USD 8 billion,according to a study by New York based Rhodium Group.
The investments so far covered 33 projects. Of these,12 were acquisitions and 21 involved green-field investments,according to the highlights of the report published in the state-run ‘China Daily’ today.
The report cautioned that the main challenge US businesses will face in pursuing infrastructure projects will be finding the logistical and legal means to participate more directly without sparking national security concerns.
Rhodium’s research director Thilo Hanemann said there is deep concern in the US over Chinese FDI in the telecom sector,and with recent incidents involving ZTE such sentiment won’t fade anytime soon.
Rhodium,which monitors Chinese FDI in the US,said that the large-scale investments could make 2012 a record year with over USD 8 billion,beating the USD 5.7 billion record set in 2010.
Ge Shunqi,deputy head of the Institute of International Economics at Nankai University in Tianjin,told China Daily that with the US economy trying to get out of the doldrums,investment from China is particularly welcomed.
“Chinese investment in the US offers great potential and will help stabilise growth in the next decade,” he said.
Sang Baichuan,director of the Institute of International Business at the University of International Business and Economics,believed that a new era was dawning.
“After decades of growth,Chinese enterprises are capable of entering the developed US market and China’s large foreign reserves will also be of benefit,” he said.
“Some enterprises will enjoy easier access to the US market and lower costs while others will acquire natural resources as well as high-end technology resources,” he said.
Ge added that “high-end manufacturing and public infrastructure will be the key areas for Chinese investment in the US” as the US embarks on re-industrialisation,the Daily quoted him as saying.
Major projects targeted by Chinese FDI this year include the USD 2.5 billion purchase by China Petroleum and Chemical Corp or Sinopec,of a one-third stake in five shale oil and gas fields across the US from Ohio-based Devon Energy.
Copper-tube producer Golden Dragon also broke ground on a USD 100 million manufacturing facility in Wilcox County,Alabama.
The banking sector saw movement with the acquisition by Industrial & Commercial Bank of China of 80 per cent of Bank of East Asia’s US operations for USD 140 million.
While Super Aviation is still awaiting approval from US authorities,Wanda and AMC said they have received approval from the Committee on Foreign Investment in the US.
Along with clearances from Chinese and other US authorities,its means the deal should close as planned by the end of August,according to Wanda.
If the Super Aviation deal is also approved,these investments would push total Chinese FDI in the US beyond USD 8 billion this year and that does not include projects in the pipeline,the report said.
While Chinese investors continue to pour money into a range of industries,a few sectors specified in the Rhodium report,including oil and gas,which,led by the Sinopec-Devon deal,accounted for the bulk of Chinese FDI in the US.
“The US has rich natural and technological resources.
If it’s fully open to foreign investors,Chinese investment will see significant growth in these two fields,especially in acquiring technology,” Ge said.
Trailing oil and gas were aerospace,banking,metals processing and plastics.
Alternative and renewable energy recorded the highest
number of deals,although these investments were relatively
Besides big-ticket projects,Rhodium Group pointed to recent positive developments in investment policy,both in the US and China.
It cited US President Barack Obama’s order to increase visa-issuing capacity in China by up to 40 per cent in 2012 and official statements welcoming Chinese participation in US infrastructure development during the May US-China Strategic and Economic Dialogue.