The concept of "Made in America" is slowly giving way to "Made by China … in America," as Chinese investors are increasingly snatching up U.S.-based companies and assets and raising the eyebrows of some regulators and market spectators.
Since the turn of the new year, Chinese suitors have either announced interest in or closed on several multibillion dollar acquisitions of American institutions, such as General Electric's appliance wing, construction manufacturer Terex, Starwood Hotels, California-based tech company Ingram Micro and finance and production outfit Legendary Entertainment.
And although the full value of the deal has yet to be publicly unveiled, the Chicago Stock Exchange announced in February that it planned to be acquired by the China-based Chongqing Casin Enterprise Group at some point later in 2016.
"This proposed acquisition would be the first time a Chinese-owned, possibly state-influenced firm maintained direct access into the $22 trillion U.S. equity marketplace," a group of congressional representatives said in a letter to a top Treasury Department official back in February, requesting a "full and rigorous investigation into this proposed acquisition to address our concerns and provide clear information to the American people."
Chinese foreign direct investment into the U.S. hit a record $15.7 billion in 2015, up 30 percent from the year prior, according to economic analysts at the Rhodium Group. A separate Rhodium report published last month estimated 83 percent of America's congressional districts were home to some form of Chinese investment.
In few industries is China's investment growth more apparent than real estate. A report published Sunday by the nonprofit Asia Society and the Rosen Consulting Group estimates Chinese buyers between 2010 and 2015 spent at least $93 billion on American residential property, with total expenses rising at an average annual rate of about 20 percent each year.
Over that period, Chinese companies and individuals also bought up at least $17.1 billion in existing office buildings, hotels and other commercial buildings on U.S. soil. By the end of 2015, the report found, China was the source of at least $350 billion in U.S. real estate holdings and investments, and costs for Chinese-backed construction projects in the U.S. had climbed to at least $15 billion.
"Chinese direct investment in U.S. real estate was negligible until 2010 but has since grown dramatically and visibly," the report said. "While it is not as politically sensitive and does not directly impact national security as does Chinese investment in U.S. technology or telecommunications, real estate affects more people and communities and involves policymakers at multiple levels."
To be sure, foreign investment is neither specific to China nor inherently problematic. In fact, American companies' own outbound investments in 2014 to countries around the world clocked in at more than $4.9 trillion, according to the Bureau of Economic Analysis.
It's also important to keep in mind that in the vast majority of cases, a foreign company's investment in a particular country doesn't necessarily mean one country's government is getting the upper hand over another's. If Coca-Cola invests in operations in China, for example, the U.S. government doesn't automatically carry more clout in the Chinese marketplace as a result.
But the reverse isn't necessarily true, which is what makes China's investments alarming to some American analysts. Beijing officials are heavily involved in China's private sector and have at times frozen the domestic stock market and changed other finance rules on the fly in the interest of economic self-preservation.
So when a Chinese investment group buys up, say, a major stock exchange in Chicago – or a group of investors throws billions of dollars into America's real estate sector – Beijing suddenly has an inroad to some of the gears that make the U.S. economy tick.
"The Chinese economy revolves around the artificial boosting of domestic firms," the U.S. members of Congress' February letter said. "Furthermore, government manipulation of currency in the Chinese marketplace continues to be an unresolved problem for the United States government."
So is the rapid Chinese buying spree a political ploy? Is the Chinese government trying to infiltrate America's economic bedrock through the purchase of domestic companies and real estate assets?
Not exactly, says David Dollar, a senior fellow with the Foreign Policy and Global Economy and Development programs at the Brookings Institution.
And it's not as if Chinese acquisitions have been conducted unchecked; in fact, American regulators have successfully scuttled negotiations that don't even directly involve U.S. assets. The Committee on Foreign Investment in the U.S. – the specific body appealed to by the U.S. lawmakers over the Chicago Stock Exchange acquisition – earlier this year discouraged a deal that would have moved Netherlands-based Philips electronics company's LED lighting business to a Chinese investment group.
Although there has been evidence in recent years of American job losses – particularly when it comes to low-skill production and manufacturing opportunities – related to the rise of China's industrial sector, Chinese foreign direct investment offers an interesting avenue to bring jobs back to the U.S. The Rhodium Group estimates more than 90,000 American employees currently work for a China-backed domestic company.
"One of the biggest challenges I had 19 years ago when I became mayor … was we had a lot of exports. But the exports were our children leaving our community because of the lack of manufacturing jobs, the lack of good jobs for our children," Sheldon Day, mayor of Thomasville, Alabama, said during a National Committee on U.S.-China Relations event in October.
Day's rural Alabama region recently became the site of Golden Dragon Precise Copper Tube Group's first U.S. plant in a move that was expected to bring hundreds of jobs while cutting down on steep transportation costs Golden Dragon would have faced if it tried to ship Chinese-made products into the U.S. marketplace.
Chinese foreign direct investment into the U.S. totaled about $22.3 billion in 2015, an increase from roughly $18.1 billion in the prior year, according to the report.
Within real estate, Chinese owners acquired at least $8.5 billion in commercial property and at least $28.6 billion in residential property in 2015. Looking to 2025, the report projected that commercial acquisitions could hit $20 billion that year and residential buying could reach $50 billion.
The driving forces behind those projections are myriad, according to the report. They include an increasingly wide pool of Chinese firms that could look to U.S. real estate as an investing opportunity (including insurers, developers and construction companies that have yet to really enter the market).
There's also the theory that investment breeds understanding breeds more investment, and that could come to play for the China-U.S. relationship. The expected proliferation of joint ventures and informal relationships (interpersonal and intercompany) should increase the flow of deals, the report suggested.
And while many are predicting a period of Chinese economic uncertainty, the report suggested that this could actually spur near-term foreign investment as capital tries to flee the country before the country's currency loses value.
Beyond that, tighter capital controls (officially mandated or informal) could slow Chinese investment abroad in the next six to 24 months, but that is unlikely to hinder the long-term expansion of investment into areas like U.S. real estate, the report predicted.
One of the most high-profile recent examples of Chinese buyers shopping in the U.S. was the proposed $14 billion acquisition of Starwood Hotels by a consortium led by Anbang Insurance Group. After the offer appeared likely to beat out a competing bid from Marriott, the group suddenly withdrew its tender — citing "market considerations."
But Anbang had already been a big buyer of U.S. hospitality assets, agreeing to purchase Strategic Hotels & Resorts from Blackstone for $6.5 billion earlier this year and concluding a deal last year to acquire New York's Waldorf-Astoria for $1.95 billion.
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