China’s direct investment in North America and Europe is 70%, and the transaction review is getting stricter.
China and the United States have struggled in the trade war, resulting in a sharp drop in China’s investment in Europe and the United States. US law firm Baker & McKenzie said in a report that China’s direct investment in Europe and North America fell by 73% to US$30 billion last year (approximately HK$234 billion) due to the US tightening of its review and China’s restrictions on overseas investment. ), a new low in six years; among them, China’s investment in the United States has dropped by 83%, compared with only US$5 billion (about 39 billion Hong Kong dollars) last year. Due to the strict review of technology investment, investment in the United States is concentrated in the basic materials and health care industry.
80% increase in transactions with Canada
According to the report, China’s sharp fall in investment in the United States is the “culprit” that dragged down the overall data. In the past three years, China’s investment in the United States has continued to decline, falling from a peak of US$45.63 billion in 2016 to only US$5 billion last year. As a result, China’s investment in North America has also fallen sharply. Last year, it was only US$8 billion, a year-on-year decline of 75%. In contrast, Canada’s investment has increased, with an increase of 80% to US$2.7 billion last year, mainly from the acquisition of several large mines.
As for Europe, China’s investment also fell last year, from 70 billion US dollars in 2017 to 70 billion US dollars last year, slightly better than North America, the main investment projects are in the automotive, financial and information technology fields; Germany, Spain, and Sweden see improvement.
Last year, China’s investment in Europe and the United States fell sharply, reflecting the tightening of transaction censorship, especially in the United States. The report pointed out that 14 transactions were cancelled in North America last year, involving 4 billion US dollars, while at least 7 transactions in Europe fell through, worth about 1.5 billion US dollars.
In the first half of last year, North American government agencies involved a lot of projects on Chinese investment. Baker & McKenzie Washington’s international trade partner Rod Hunter pointed out that the move caused the market to be over-adjusted, and trade frictions also caused confusion in investment policies. He said that the US’s focus on investment review is on national security, but the US Foreign Investment Committee (CFIUS) still approves many Chinese investments in science and technology, but core technology companies must enforce disclosure of overseas deployments.
Baker McKenzie Global M&A Director Michael DeFranco revealed that due to new investment review regulations, trade tensions and China’s control of investment initiatives, all participants in a potential transaction need to do a lot of due diligence and frequently obtain regulatory advice to evaluate the transaction. Is it feasible.
Looking ahead to the first half of 2019, Baker McKenzie believes that China’s investment in Europe will be very strong, with more than $20 billion in transactions at the beginning of this year.
China’s investment prospects in North America remain weak, with less than $5 billion in transactions pending.