Chinese outbound investment hit another record high in 2016, rising to $200 billion globally. Nearly half of this investment targeted assets in North America and Europe, a reflection of China’s shift from commodity to technology and services sector acquisitions as it transitions to a middle-income economy.
In 2016, Chinese direct investment nearly tripled in North America and doubled in Europe, reaching a combined value of $94.2 billion in both regions, up 130% from $41 billion in 2015. Before 2008, both regions received less than $1 billion in Chinese investment per year.
Although the total number of completed deals in both regions remained consistent with previous years at 330 transactions (155 in North America and 175 in Europe), the average deal value more than doubled to $290 million, up from $120 million in 2015, as Chinese investors pursued more medium and large-sized deals.
Well over half of all Chinese direct investment into North America and Europe since 2000 has taken place in the last three years, marking the continued influence of globalization and the rapid development of China’s economy. Michael DeFranco, Global Head of M&A at Baker McKenzie
Key Trends in 2016
- Chinese direct investment in North America and Europe more than doubled in 2016
- North America overtook Europe as the top target market for Chinese investors by deal value
- In North America, Chinese investors targeted real estate, transport and consumer products. In Europe, they pursued information technology, infrastructure and industrial assets.
- Privately-owned Chinese companies drove acquisitions in North America and Europe
- Assets in California, Kentucky and Illinois were the biggest targets in North America; assets in Germany, the UK and Finland topped the list in Europe
- The number of canceled and withdrawn transactions rose amid new Chinese measures to slow capital outflows and heightened US and EU scrutiny
Outlook for 2017
In the past five years, Chinese companies have ramped up investment in Europe and North America at a remarkably fast pace. Total Chinese FDI in both regions nearly doubled from $25 billion in 2011 to $41 billion in 2015. Then it doubled again in just one year, rising to $94.2 billion in 2016 and accounting for nearly half of all of China’s global outbound investment.
Looking forward, 2017 is likely to be another strong year for Chinese FDI in both regions as large deals announced last year come to a close. At the same time, political and regulatory uncertainties weigh on a bullish outlook for Chinese FDI.
Whilst Brexit clouds the outlook for 2017 in some sectors such as financial services, the fundamental drivers for Chinese FDI into the UK and Europe as a whole remain strong. Tim Gee, M&A partner