Spotlight: Chinese direct investment in U.S. boomed in 2016

Chinese companies invested a record 46 billion U.S. dollars in the United States in 2016, triple the amount seen in 2015 and a tenfold increase compared to just five years ago, according to a report jointly released on Wednesday by the Rhodium Group and the National Committee on U.S.-China Relations (NCUSCR).

The huge jump in total Chinese investment last year is attributable to a greater number of mega acquisition deals, while the scale of greenfield projects remained comparatively small, the report said.

Such large acquisitions by Chinese companies include HNA Group's purchase of U.S. technology group Ingram Micro for 6 billion dollars, Qingdao Haier's acquisition of appliance business from General Electric (GE) for 5.6 billion dollars, and Anbang Insurance Group's purchase of 15 properties from Strategic Hotels for 5.5 billion dollars.

"While megadeals of this scale are unlikely to become the norm, the GE Appliances transaction shows that moving closer to U.S. and global customers through brands and local presence is an increasing commercial rationale for Chinese firms," the report said.

In contrast to the dominance of fossil fuel investments before 2013, more than 90 percent of Chinese direct investment in 2016 focused on services and advanced manufacturing, according to the report, reflecting China's growing appetite for high-quality investment to meet the growing domestic consumption demand.

More specifically, real estate and hospitality, information and communications technology, entertainment, consumer products and financial services stood out as primary targeted industries for Chinese investors.

Chinese investment in U.S. real estate and hospitality reached a record high of 17 billion dollars last year, making it the top sector by cumulative Chinese investment, the report said.

Meanwhile, the U.S. entertainment industry has become a significant recipient of Chinese capital since 2012. Investors targeted existing assets in Hollywood, trying to connect the world's largest film production and distribution industry with its largest potential market, the report said.

Last year, one of the largest deals was the purchase of Legendary Entertainment by Dalian Wanda for 3.5 billion dollars.

While U.S. transport and infrastructure received the least investment from China of all sectors from 2000 to 2015, it became the second largest sector for Chinese investors in 2016, according to the report.

As U.S. President Donald Trump has announced a 1 trillion-U.S.-dollar infrastructure investment plan, there may be more room for Chinese investment in U.S. infrastructure.

"Multiple Chinese construction firms already operate subsidiaries in the United States. State-related and private investors have also shown great appetite for conservative assets with a stable long-term return, making infrastructure a potential alternative to commercial real estate ventures," the report analyzed.

According to the report, Chinese investors further expanded and deepened their footprint in the United States. With coastal states such as New York and California remaining the major beneficiaries of the investment, the South and Midwest states also received significant capital in 2016.

Out of 50 U.S. states, 46 had received direct Chinese investment in the form of a newly established greenfield project or the acquisition of a company headquartered in that state by the end of 2016, according to the report.

Meanwhile, private investors have become the major drive for the rapidly-growing investment, as data show that about 79 percent of the total Chinese investment in the United States was made by private sector companies.

The U.S.-China economic relationship nowadays supports roughly 2.6 million jobs in the United States across a range of industries, among which about 104,000 jobs are created by Chinese investment, according to a study conducted by Oxford Economics and the U.S.-China Business Council. Endi