Chinese acquisitions of US assets drop, deals with Europe increase
Author: CSEBA / SEEbiz / Reuters
28th June 2018
NEW YORK - The rapidly deteriorating trade and investment relationship between Washington and Beijing is sending a further chill through Chinese deal makers who have already seen the number of Chinese acquisitions of American assets take a big hit.

So far this year, Chinese companies have spent just $1.6 billion on U.S. assets, down almost 80 percent from the year earlier period, according to Thomson Reuters data.

By contrast the amount China has spent on European assets has risen 39 percent from last year to $45.1 billion.

"We are now focusing on Europe-bound deals and having U.S. deals on hold. The trade war between China and U.S., if not short-term, will be a mid-term thing and will take some time to conclude," said Lin Feng, founder and CEO of Chinese investment and advisory firm DealGlobe.

"Opportunities in the U.S. will be more small investments, or joint ventures in China. It will definitely hurt significant minority stake acquisitions, but on the other hand it may help targets in Europe and Israel," he added.

In 2016, which stands as the record for Chinese cross-border deal making, China acquired U.S assets worth $62.6 billion and spent $88.4 billion on European assets.

Since then, China's imposition of capital controls and in particular a regulatory crackdown on some of its most acquisitive companies, such as HNA, Dalian Wanda and Anbang Insurance, have badly dented Chinese investment flows heading for American shores.

The rejection by Washington of some major deals on national security grounds have only acted as a further deterrent to bankers and the Chinese companies they advise.

And this week, Washington has been signalling there will be tougher restrictions on Chinese investment, especially in sensitive areas of the economy, such as technology.

“You do not want to give Jeff Bezos a seven-year head start.”

On Tuesday, the U.S. House of Representatives overwhelmingly passed a bill to tighten foreign investment rules, spurred by bipartisan concerns about Chinese attempts to acquire sophisticated U.S. technology.

U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions as originally proposed.

And there is also the escalating tit-for-tat trade dispute, in which the United States has threatened to impose duties on up to $450 billion of Chinese imports, with the first $34 billion portion set to go into effect next month.

Since Trump took office early last year, deal makers have steadily become accustomed to a more hostile U.S environment.

Headline deals blocked by Washington in recent months included, notably, the $1.2 billion acquisition of Moneygram International by China's Ant Financial in January.

Delays in gaining approval led to the abandonment of a plan for HNA to buy a $200 million stake in Skybridge Capital, a hedge fund founded by Trump's former aide Anthony Scaramucci.

Other scrapped deals have ranged from a $25 million bid for a stake in the Chicago Stock Exchange, which was blocked by the U.S. Securities and Exchange Commission, to a $16.5 million offer for a U.S. pig breeder.

Although, the door is not entirely closed.

This month the U.S. approved the $2.7 billion takeover of U.S. insurer Genworth Financial by China Oceanwide Holdings, a deal first struck in October 2016.

Deal makers remain hopeful that any easing in the current tensions could boost China-U.S. deal volumes once more.

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