Amid increasing U.S.-China trade friction, “it’s a good strategy to put the U.S. aside for later exploration,” Ren Zhengfei, Huawei Technologies’ (002502:CH) founder and chief executive, told French media recently, reported the China Daily on Dec. 5. His company already has more than 1,700 employees in the U.S. and does more than $1 billion in annual sales.
But even as Huawei makes headlines saying it will halt new investments in the U.S., Chinese companies still favor it, says a new report on Chinese overseas investment. “Despite political noise, North America is perceived as [an] easier [place] to do business,” said A Capital, a private equity fund based in Brussels and Beijing, on Dec. 3.
Chinese investors have put $24.7 billion into mergers and acquisitions in North America in the first three quarters of this year; that’s up almost threefold over the same period last year and contrasts with a 25 percent drop into Europe. Globally, Chinese deals so far this year amount to $41.6 billion, up 20 percent, with the U.S. accounting for 60 percent of the pie, according to the report.
State-owned companies continue to be the biggest buyers both by number of deals (60 percent) and by value (75 percent), but activity by private enterprises is growing fast, with deal value up 86 percent. “Private firms are going for bolder moves and developed markets,” said A Capital.
While big resource acquisitions, such as CNOOC’s (CEO) $15.1 billion purchase of Nexen in February, have dominated deals, that’s changing. In the year through September, transactions involving resources increased only 7 percent, while investments in nonresource industries and services were up almost 50 percent.
Still, big transactions continue to be the norm. The top five deals so far this year—including CNOOC-Nexen and Shaunghui International’s (000895:CH) $7 billion takeover of pork giant Smithfield—accounted for almost three-quarters of total deal value, estimated A Capital.
Meanwhile, just two purchases, those by CNOOC and Shuanghui, made up 90 percent of the value of all North American deals. “Blockbusters set the tone & are larger and larger,” says the report, pointing out that the average size is up 50 percent, to $603 million.