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Beijing’s crackdown on capital outflows and investments in non-strategic assets coupled with the increasing hostile environment in Western countries to PRC investment in a growing number of "sensitive" sectors caused China’s ODI to drop nearly 30% in 2017 to around $120 billion.
By the numbers: According to a new report from the Rhodium Group, PRC investment in the U.S. in 2017:
- "[D]ropped by more than a third (35%) in 2017 to $29 billion of consummated deals. In terms of new activity, the drop was even sharper – the value of newly announced Chinese acquisitions in the US dropped by 90% compared to previous year."
- "In terms of industries, the biggest losers were entertainment, consumer products and services and real estate and hospitality. Investment remained stable or grew in health and biotech, ICT and transport and infrastructure."
- "[P]rivate investors continued to account for about 90% of investment in the US."
The bottom line: Do not expect these trends to change in 2018. Beijing has signaled it will not weaken its crackdown on capital flight and “irrational” overseas M&A, and the U.S. and other Western countries are only increasing their scrutiny of PRC deals.