Chinese companies increase stake in US

China's direct investment in the United States showed strong momentum in the first three months of this year despite a weak fourth quarter of 2012 and the negative impact of "national security" concerns on some deals.

During the first quarter, Chinese companies concluded eight mergers or acquisitions and nine greenfield investments — those involving construction of factories or offices — worth a total of $2.2 billion, according to a report released on Tuesday by Rhodium Group, a New York firm that tracks Chinese investment in the US.

M&A highlights were the acquisition by China National Offshore Oil Corp, or CNOOC, of the US drilling operations of Canada's Nexen Inc; auto-parts company Wanxiang Group's successful $257 million bankruptcy-auction bid for electric-battery maker A123 Systems Inc; BGI-Shenzhen's purchase of California-based Complete Genomics Inc; Hanergy Holding Group's purchase of solar technology company MiaSole; and Shanghai Fosun Pharmaceutical Co's stake purchase in Saladax Biomedical Inc.

Greenfield deals included a power-generator manufacturing factory in Virginia planned by Shenzhen Superwatt Power International Co, a joint venture involving developer China Vanke Co on a San Francisco condominium project and offices in Silicon Valley for search engine giant Baidu Inc.

"Those deals underscore that high-tech manufacturing and modern services are emerging as mission-critical for Chinese investors as their fast-changing home economy matures," said Thilo Hanemann, Rhodium's research director.

Chinese acquisitions in the US now under discussion or awaiting regulatory approval have a total value of over $10 billion, the highest ever for the category, according to Rhodium's report.

It also found that privately held Chinese companies have increased their investment in the US. Over the past 15 months, they spent more on US deals than in the previous 11 years combined.

State-owned enterprises, or SOEs, have long dominated investment by China in the US, but private companies accounted for 80 percent of deals and 50 percent of deal value from January 2012 through March of this year.

Hanemann attributed the reduced SOE involvement to changes in the Chinese leadership, a related shuffling of management at major State companies and private companies' growing interest in medium- to large-scale deals.

According to the report, US subsidiaries of Chinese companies employed an estimated 32,000 people at the end of the first quarter, 2,000 more than were employed during last year's fourth quarter.

That period, much like the fourth quarter of 2011, was slow. Chinese companies closed only eight deals worth $178 million between October and December. Overall, though, 2012 was a record year for Chinese direct investment in the US, totaling $6.5 billion.