Chinese investments in North America, Europe hit 9-year low in 2019: report

WASHINGTON - Chinese investments in North America and Europe hit a nine-year low in 2019, according to a new report from global law firm Baker McKenzie and independent research provider Rhodium Group released Wednesday.

Chinese investors completed deals worth $19 billion in North America and Europe in 2019, representing the lowest level since 2010 and 83 percent down from the peak of $107 billion in 2017, the report showed.

Chinese investment in North America fell by 27 percent to $5.5 billion in 2019, the lowest level since 2009, while Chinese investment in Europe fell by 40 percent to $13.4 billion last year, the lowest since 2013.

China's outbound investment continues to be weighed down by a number of factors including restrictions on outbound investment from Beijing, strengthened regulatory reviews in the United States and Europe, slowing growth and lower liquidity in the Chinese economy, and geopolitical tensions, according to the report.

However, easing trade tensions between the US and China, steps to liberalize inbound FDI (foreign direct investment) policy in China and more liquidity in the Chinese economy will lay the foundations for a potential rebound in Chinese outbound investment in 2020, the report noted.

"Several rounds of policy liberalizations by the Chinese government have abolished previous equity thresholds for foreign investors and driven deals in sectors such as automotive and financial services. This in turn helps set the scene for the return of higher levels of Chinese outbound investment in the coming years," said Michael DeFranco, global head of M&A at Baker McKenzie.

The report also noted that a "phase one" trade deal between China and the United States could help put both countries back on a more rational track of economic relations and in turn diffuse investor concerns about worst case outcomes.

"We see grounds for a degree of optimism as there are a number of variables showing change in the right direction, which could propel Chinese outbound investment to bottom out and return to modest growth in 2020," said Tracy Wut, a M&A partner at Baker McKenzie in Hong Kong.