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November 2023
AAM Magazine
November 2023
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North America tops Europe as preferred destination for Chinese investors

Combined Chinese direct investment in the advanced economies of North America and Europe stood at a record high of US$94.2 billion in 2016, more than double the total in 2015, according to a report by international law firm Baker McKenzie.

Global Chinese outbound investment also hit a new high in 2016, reaching almost $200 billion, the report adds.

For the first time, North America trumped Europe as the top investment destination for Chinese investors, attracting $48 billion compared to the $46 billion invested in Europe. Both regions saw a leap in investments, by 189% in North America and 90% in Europe, compared to the previous year.

The increased investment in North America was mainly driven by US-based deals, with investment levels jumping by almost 200% from 2015 to 2016, to reach $45.6 billion. Investment into Canada also saw a 120% increase in value to reach a three-year high. The report attributed the overall increase in value to a larger average deal size as opposed to deal volume. In North America, real estate and hospitality attracted the most foreign investment last year with $17.4 billion, followed by $6 billion into transport, utilities and infrastructure, $5.7 billion into consumer products and services, and $4.8 billion into the entertainment sector.

Investment in the IT sector, however, was dominated by Europe, which was a paradigm shift from the traditional investment hub of North America for IT-related deals. Chinese investors favoured the ICT (information and communications technology) sector, investing $13.7 billion, followed by transportation, utilities and infrastructure at $12.2 billion and industrial machinery attracting $6.2 billion.

“Well over half of all Chinese direct investment into Europe and North America since 2000 has taken place in the last three years, marking the continued influence of globalisation and the rapid development of China's economy,” says Michael DeFranco, global head of M&A at Baker McKenzie.

“The deal pipeline is strong in both Europe and North America, but political and regulatory uncertainties are weighing on the outlook. A short-term slowdown in new deals is likely in 2017, driven both by China's temporary measures to slow capital outflows and tougher screening of inbound deals in the US and Europe,” Mr. DeFranco adds.

Leading the overseas investment trend were privately-owned Chinese companies, which accounted for 70% of the total deals closed, outpacing investments by state-owned enterprises (SOEs). which accounted for less than 30% of foreign direct investment value in 2016.

Purely financial investments by SOEs also dipped from 53% of total deal value in North America in 2015, to 29% last year as large Chinese corporations made more of the deals.

“Investment in both North America and Europe is now mostly driven by private companies making strategic investments to grow their core areas of business,” says Danian Zhang, chief representative at Baker McKenzie's Shanghai office. “Chinese companies are growing in market share, moving up value chains and investing in know-how to drive domestic and international demand for their goods and services.”