Chinese companies are on a North American buying spree, investing $14 billion in the U.S. last year, a record high, says a new report by New York’s Rhodium Group.
“Chinese investment in the United States doubled in 2013, driven by large-scale acquisitions in food, energy and real estate,” write analysts Thilo Hanemann and Cassie Gao in “Chinese FDI in the U.S.: 2013 Recap and 2014 Outlook,” released on Jan. 7.
“We expect Chinese interest in U.S. assets to remain strong in 2014 because of aggressive economic reforms in China, a more liberal policy environment for Chinese outbound investors, and a positive outlook for the U.S. economy.”
Whereas state-owned companies have dominated in total deal value in the past, that is no longer true. In 2013, more than 70 percent of investment came from private enterprises, responsible for more than 80 percent of a total of 87 deals (of which 44 were acquisitions and another 38 were greenfield projects).
Where is the money going? Unconventional oil and gas was a top draw, with $3.2 billion invested in deals that include CNOOC’s (CEO) purchase of Calgary, Alberta-based Nexen Energy’s U.S. operations, Sinopec’s (SHI) joint venture with Chesapeake Energy (CHK) of Oklahoma City, and a Sinochem International (600500:CH) stake in West Texas’s Wolfcamp Shale. Commercial real estate was also a big draw, with 18 investments in San Francisco, Los Angeles, New York, and Detroit totaling $1.8 billion. And the single biggest deal: Shuanghui’s (000895:CH) $7.1 billion takeover of pork processor Smithfield.
Chinese companies are also becoming big employers of Americans, says Rhodium, providing more than 70,000 full-time jobs as of the end of last year. That’s an eightfold increase since 2007. Huawei Technologies (002502:CH) and Lenovo (992:HK) are big employers, but just one company—Smithfield—accounted for 37,000 of the total workers at Chinese companies.
A separate report released in early December by private equity fund A Capital found that Chinese investors put $24.7 billion into mergers and acquisitions in all of North America in the just first three-quarters of last year.