Chinese Firms Look West Amid Economic Slowdown
From investments in energy, property, entertainment and other sectors, David Pierson and Don Lee of The Los Angeles Times report that Chinese firms have been snapping up U.S. assets at a record pace:
With U.S. real estate prices depressed and many firms in the West starved for cash, the Chinese see a prime opportunity to rummage through the bargain bins of rich countries to gain technological know-how and international reach.
They’re also hedging against rising costs and uncertainties inside China. The world’s second-largest economy is struggling with its slowest growth rate since the financial crisis in 2008.
“The Chinese growth model is changing fundamentally,” said Thilo Hanemann, research director for the New York-based Rhodium Group, which tracks Chinese direct investment.
“Chinese companies need to escape the profit squeeze in low-end manufacturing and move up and down the value chain. Expanding investment in developed economies is an essential part of that,” Hanemann said.
Examples abound – Real estate magnate Wang Jianlin’s Wanda Group agreed to acquire cinema chain AMC Entertainment in late May, and last week Chinese sovereign wealth fund CIC made an investment in a U.S. natural gas export plant. The trend is worrying some American officials, Pierson and Lee add, even if the China issue has taken a backseat during the U.S. presidential campaign. China’s investment push west has also raised official eyebrows north of the border, where state-owned CNOOC has faced obstacles in its proposed $15.1 billion acquisition of Canada’s Nexen. CNOOC’s offer for Nexen would be the richest foreign takeover ever for a Chinese company, according to Reuters, which reported last week that shareholders will vote next month on whether to approve the transaction:
The move is the most ambitious foray by resource-hungry China into North American energy since a 2005 attempt to buy U.S.-based Unocal for $18.5 billion was thwarted by a political backlash in the United States.
Chinese companies have been among the most aggressive in targeting assets around the globe to help feed demand in the world’s second-biggest economy.
According to details included in a proxy circular filed with regulators, CNOOC’s July 23 offer of $27.50 per Nexen share came after the Canadian firm rejected two earlier bids.