2013 Account Balance: $14 Billion of Chinese Investments in the US

According to a study conducted by Rhodium Group, a group of New York analysts, Chinese investments in the United States doubled in 2013. These investments were concentrated in the energy and food sectors. This analysis, published on Jan. 7, reveals that, after a drop of 36 percent in 2012, China’s investments in the U.S. reached $14 billion in 2013. In all, 82 deals were made in 2013, of which 44 dealt with company acquisitions — public and private — and 38 were new projects. On the subject of company acquisitions, the report specifies that private companies, which made up 70 percent of acquisitions in 2013, have always represented the majority of Chinese investments in the U.S. Nevertheless, the value of the total investment in the private sector remains clearly weaker than in the public sector, so much so that public companies are ubiquitous in strongly capitalistic sectors like energy. Among the leading investments, $7.1 billion were attributed to the food sector, $3.2 billion to the “unconventional oil and gas boom” and $1.8 billion to the real estate sector. The energy sector was marked by the buybacks of A123, MiaSole, Global Solar, Satcon and Ralls, acquisitions that have significantly contributed to the U.S. economy, most notably by preserving many jobs. Prospects bode well for 2014. In fact, the Chinese government is working on a program to reform investment policies. In December 2013, a notice issued by the Chinese Council on Government Affairs indicated that a reform regarding the procedure for the approval of investments abroad would become operational. These test and approval procedures imply a certain number of administrative measures. Notably, it is necessary to file documents with a certain number of different authorities. While this procedure was simplified in 2004, the reforms announced in December would lead toward more decision-making freedom for companies. Therefore, the functions of the authorities will be limited to execution, monitoring and regulation. Nevertheless, although the prospects for Chinese investment in the U.S. seem positive, the analysis insists that there are risks that could put the brakes on these investments. Besides these risks, we must consider public companies’ discipline with regard to capital, which could lead to a drop in investments and risks volatility in the energy sector. According to Shen Danyang, the spokesman for the Chinese Ministry of Commerce, “In 2013, there was only a $10 billion deficit between Chinese investments abroad and foreign investments in China. Chinese investments abroad will probably surpass direct investment abroad by next year or in 2016, if it does not happen this year. The balance between these two elements is good for international cooperation, as well as for the whole world.”