MARKETS & INVESTING | Staff Reporter, China

Chinese FDI into Europe and North America down 18% in H1

Only US$12.3b was invested into these regions, the lowest activity level since 2014.

Chinese companies invested only US$12.3binto Europe and North America in the first half of the year, representing the lowest level since 2014, according to data from Baker McKenzie in partnership with Rhodium Group.

In a breakdown, investments into Europe fell by 26% YoY to US$9b, the lowest since 2016. However, investments into North America rose 19% to US$3.3b, driven by capital injections into the USA.

Despite the decline, Europe still received three times more Chinese investments than North America due to the former being a better match for Chinese outbound policy, and because of lower political and regulatory scrutiny in Europe.

China’s stringent capital controls may have contributed to the lower investment activity, according to Baker McKenzie.

Privately-owned firms accounted for 94% of the combined investment in both regions. State-owned investors’ share in the total investment dropped 6% and 8% in Europe and North America, respectively.

Consumer products and services, and automotive accounted for three-quarters of the total deal value in the two regions. Baker McKenzie said that the automotive sector received the second-highest Chinese investments mainly due to large deals that include Evergrande’s acquisition of 51% of electric car-maker NEVS for US$930m and Envision Energy’s purchase of Nisan’s Tenessee electric-battery operations.

Chinese investment peaked in Europe in H1 2017 at US$53.9b and in North America in H2 2016 with US$28.4b.

European and North American investments are not the only ones who plummeted, with Baker McKenzie noting that overall Chinese global outbound investments fell during the first half of the year. Newly announced global M&A transactions by Chinese firms declined 60% to US$20b.

Baker McKenzie expects Chinese investment to remain low over the next six months, with only US$4.6b in pending investments for North America and US$2b in Europe as of June 2019.

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