Dragon Report

Current Outbound Direct Investment (ODI) Activities

  1.     Geithner: “ I am very confident that if you look over the next several years, you are going to see Chinese investment in the U.S. continue to expand very, very rapidly.”

  2.      A rising of Chinese investment capital is crossing the Pacific, penetrating markets and creating jobs from coast to coast, according to the report conducted by U.S. based economic consultant the Rhodium Group.

  3.      Chinese investments in the U.S. in 2010, excluding bond purchases, range from $3.9 billion - a  figure put out by NY research firm Dealogic - to $6.4 billion, from Derek Scissors.

  4.      Chinese companies would unleash some $1 trillion to $2 trillion in new greenfield investments or mergers and acquisitions around the world by 2020.   That would be a four- to eight-fold increase of China’s current outward investment of about $230 billion, according to the report done for the Asia Society, the Kissinger Institute on China and the United Sttes and the Woodrow Wilson International Center for Scholars.

  1. China has set a record in overseas merger and acquisition activities in 2010, and the momentum is expected to remain in 2011, according to Price Waterhouse Coopers.

  2. Data from PwC shows that in 2010, Chinese companies launched 4,251 merger and acquisition deals both domestically and overseas, an 16 percent increase from the previous year. The total transaction value of the deals reached US$ 200 billion, 27 percent higher than in 2009.

  3. In terms of overseas M&A, a total of 188 deals were filed by Chinese companies in 2010, a 30 percent year-on-year increase and historical high. Total transactions reached US$ 38 billion, compared with US$ 30 billion in 2009. “The overseas resources sector is the main target for Chinese M&As fueled by the country’s rising resource demand to support the rapid economic growth,” said Lu Yubiao, partner at PwC’s M&A department of. In addition, Lu said that Chinese buyers are seeing a growing appetite in overseas high-tech, equipment manufacturing and auto enterprises, especially in the U.S. market. The European Union, Australia, Africa and Asia are the major destinations for Chinese capital. In 2010, 32 M&A deals were launched in the U.S. by Chinese companies, rising from 21 from 2009.

  4. PwC data shows that private equity (PE) funds were involved in 580 M&A deals in 2010, up 66 percent from 2009. Li Ming, partner at PwC, said that PE is playing an increasing role as the source of Chinese M&A deals. “The Chinese government is encouraging PEs in an aim to channel the capital flow into competitive private sectors,” said Li. Li said that Chinese M&A activity will remain active in 2011 as the country’s 12th Five-Year Plan for the period from 2011 to 2015 is set to continue encouraging domestic industry consolidation and overseas cooperation.

  5. Lu Yubiao said that Chinese companies continue to exhibit a strong interest in M&A deals related to highly-qualified overseas assets due to the country’s surging demand for natural resources and technology investments.

  1. The U.S. Welcomes Chinese Foreign Direct Investment - The handful of deals blocked by CFIUS are aberrant - Bloomberg, in a December 2010 article titled Chinese Companies Expand to U.S. Soil and markets, reported that Chinese companies invested $2.81 billion in U.S. projects and acquisitions during the first nine months of 2010. CNN Money reported that in 2010 Chinese companiese acquired or announced they were establishing more than 50 companies.  Direct Chinese investments in the U.S. would likely be even greater were it not for press reports that have created the impression that the U.S. is hostile to investments from China.  The press is full of terms such as CFIUS (the committee on Foreign Investment in the U.S.) and FINSA (the Foreign Investment National Security Act), and takes of Chinese companies forced to abandon planned acquisitions of U.S. companies. Some Chinese companies have been forced to abandon their acquisitions plans.  However, each of those celebrated cases presented unique circumstances that would exist for the majority of Chinese companies who may wish to set up operations in the U.S.  The reality is that the U.S. remains one of the world’s economies most open to foreign investment, including from China.   With a few very limited exceptions, such as airlines, foreigners are as free to invest in greenfield projects that create new businesses in the U.S. on the same basis as Americans.  Recent Chinese greenfield investments in the U.S. icnlude a $1 billion steel pipe mill that Tianjin Pipe is planning to build this year near Corpus Christi, Texas;  Suntech Power Holdings’ solar panel assembly plant in Arizona; and American Yoncheng Gravure Cylinder plant that Spartanburg, South Carolina.  

  2. The United States Welcomes Chinese Foreign Direct Investment - The Handful Of Deals Blocked By CFIUS Are Aberrant .pdf

  1. New York - Chinese direct investment into the U.S. is more than doubling annually, with over $5 billion in 2010 alone. A Special Report undertaken by Asia Society’s Center on U.S. - China Relations and the Kissinger Institute on China and the United States at Woodrow Wilson International Center for Scholars provides the most comprehensive study to date of Chinese FDI in the U.S. and outlines its enormous potential to create economic growth.  But it warns that the U.S. may squander immense opportunities for employment and investment gains through political fear-mongering. The report was launched on May 4, 2011, with a keynote address by Secretary of Commerce (and future U.S. Ambassador to China) Gary Locke.  The authors of the report, Daniel H. Rosen and Thilo Hanemannof the Rhodium Group, estimate that Chinese firms in the U.S. have already created more than 10,000 American jobs.  But despite an overall effective U.S. screening policy for inward investment, political interference threatens to divert legitimate and potentially beneficial investment deals. Surging Chinese investment has triggered populist anxieties in the U.S., just as Americans once feared economic domination by Japan. “Japanese investment in the U.S. during the 1980s was  as controversial as China’s,” the authors say, “but in the following years, U.S. affiliated of Japanese companies invested hundreds of billions of dollars in the United States, and today employ nearly 700,000 Americans.


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