Chinese outbound investment plunges, amid souring relationship with the U.S.
January 29, 2019 Category China News Round-up, Weekly
China’s outbound investment and construction plunged last year, dropping to USD179.1 billion from USD279.8 billion in 2017 and USD270.9 billion in 2016, according to the China Global Investment Tracker of the Washington-based American Enterprise Institute (AEI). Chinese investors continued to pull back from the United States – investment there fell to USD10.6 billion last year, a 60% drop from the USD24.9 billion in 2017. Chinese investment in the U.S. peaked in 2016 at USD54.1 billion, according to the report. Germany, meanwhile, was the top destination for Chinese investment after carmaker Geely Group bought a USD9 billion stake in Daimler in February.
The decline in outbound investment and construction was more evident in state-owned companies, which initiated fewer investments and signed fewer deals for power construction projects, report author Derek Scissors, a resident scholar with the AEI, said. “Overseas, major investment partners such as Germany are joining the U.S. in being more cautious about Chinese acquisitions,” Scissors said. At home, pressure on capital outflows restricted Beijing’s financial support to state-owned companies for investments and construction projects overseas, the report said.
But President Xi Jinping’s ambitious Belt and Road Initiative (BRI) continues to expand – it now involves 125 countries, almost double the number from when it first launched in 2013. The AEI found that Chinese investment in those countries accounted for 40% of total outbound investment last year, more than double the proportion for 2017, as Chinese invested less in wealthier countries. According to the report, the Middle East was the top destination for new China-backed construction projects last year, led by Egypt and the United Arab Emirates (UAE). By sector, outbound investment went mainly into energy projects, particularly the oil industry, while agriculture and food outpaced technology investments.
Anbang Insurance Group, which once led the acquisition of U.S. companies and properties, is continuing to whittle down its empire. It is exploring the sale of the Manhattan office building that houses its U.S. headquarters, and of its domestic health-insurance arm Hexie Health Insurance to Fujia Group, a Liaoning-based petrochemicals-to-finance group. Anbang bought 717 Fifth Avenue from Blackstone Group in 2015 for USD414 million amid an offshore buying spree that also included Vancouver’s largest office complex and Belgian insurer Fidea.
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