Chinese ODI in US to maintain record growth, says report

China's ODI in the US grew to more than $15 billion in 2015, setting a record, with more than $30 billion already in pending deals and projects in the first quarter of 2016. [Photo/IC]

It is likely to be another record year for Chinese outbound direct investment in the United States, although the American political climate could affect the inflow, according to a new report.

China's ODI in the US grew to more than $15 billion in 2015, setting a record, with more than $30 billion already in pending deals and projects in the first quarter of 2016.

New Neighbors: 2016 Update was released on Tuesday by the National Committee on US-China Relations and Rhodium Group, an economic research firm. It is a follow-up to a 2015 study on Chinese ODI that includes a breakdown of Chinese investment in US congressional districts.

The 2015 ODI total exceeded the $12 billion in 2014 by nearly 30 percent, and 2015 was the second consecutive year that mergers and acquisitions by Chinese investors topped more than 100 deals, totaling $13.5 billion, according to the report.

"2016 will by all means be a record year for Chinese investment in the US barring any major disruptions," said Thilo Hanneman, co-author of the report, at Covington & Burling LLP in Washington, where it was released.

The number of Chinese-affiliated companies in the US exceeded 1,900 at the end of 2015, extending across more than 80 percent of congressional districts.

New York was the leading state for Chinese investment in 2015. As greenfield investment picked up and many existing companies expanded employment, the number of Americans employed by Chinese-affiliated companies rose by 12 percent to 90,000 at the end of last year.

"Broken down by industry, the most important trends are that Chinese companies are building energy-intensive or energy dependent factories in the US. They've started to discover a competitive advantage in the US including cheap energy," said Hanneman.

Michael DeFranco, chairman of the Baker & McKenzie LLP law firm's global M&A practice, is confident China can maintain the current pace of ODI.

"Chinese companies are acting with confidence and continuing to make major moves in Europe and North America. We see no let up in that interest－far from it－we expect Chinese investment into Europe and North America to hit further record highs in 2016," he said.

David Fagan, a partner at Covington and Burling LLP, said at the Washington event that the economies of China and the United States are truly intertwined.

"In turn, the economic relationship that can be forged through investment is not just something that is economically beneficial. The relationships that can develop through this type of investment can help balance some of the political differences between the two countries," Fagan said.

Allan Fong in Washington contributed to this story.