Chinese investments in North America and Europe fell by 73 percent last year as a result of tightened US scrutiny of foreign takeover deals and Beijing’s restrictions on outbound investments.
Data from law firm Baker & McKenzie showed that Chinese foreign direct investment (FDI) flows into the United States have also turned negative, falling to the lowest in seven years. Chinese investments in the US fell by 83 percent, while growing by 80 percent in Canada.
Last year, Chinese companies completed just $4.8 billion in new business acquisitions and investments in the US, down 84 percent from $29 billion in 2017 and 90 percent from $46 billion in 2016.
With the $13 billion in US asset sales by Chinese companies, net Chinese investment in the United States dropped by $8 billion in 2018.
Rhodium Group consultancy warned on Monday the pressures would persist this year, adding that the “dark cloud over US-China relations” was unlikely to disappear.
“The pipeline of pending Chinese investments in the US is at a five-year low, and most hurdles weighing on China’s US investment are poised to persist or deepen,” the group said. It cited the continuation of Beijing’s strict outbound capital controls and the effects of its campaign to cut debt and risky lending.
Tougher regulatory controls also led to the cancellation of 14 Chinese investment deals in North America (with a combined value of $4 billion) and seven in Europe worth $1.5 billion.
“Some deals are still getting done despite new investment screening regulations, trade tensions and Chinese investment controls,” said Michael DeFranco, global head of M&A at Baker McKenzie.
“But all parties in a prospective transaction need to conduct plenty of due diligence and take in-depth regulatory advice to assess if a deal is viable,” he added.