Chinese companies boost overseas investment in consumer products, EV supply chain

Chinese battery big Contemporary Amperex Technology (CATL), pictured right here on April 2, 2020, broke floor on its first overseas manufacturing facility in Germany in late 2019 and plans so as to add as much as 2,000 jobs there by 2025.

Martin Schutt | image alliance | Getty Images

BEIJING — Chinese companies invested extra in consumer sectors and the electrical car supply chain worldwide, whilst geopolitics restricted total outbound capital flows, in accordance with a report launched Wednesday by Baker McKenzie and Rhodium Group.

Consumer services held the most important share of accomplished mergers and acquisitions final yr, at $5.2 billion, up from $1.1 billion in 2020, in accordance with the information. That nonetheless fell wanting pre-pandemic ranges of $10 billion in offers in 2019.

However, White House restrictions on inbound Chinese investment in tech and Beijing’s efforts to maintain capital inside nationwide borders have contributed to a decline in Chinese overseas offers. The high-tech and actual property sectors have been significantly exhausting hit, in accordance with a launch.

Overall, accomplished overseas mergers and acquisitions by Chinese companies dropped to $23.7 billion in 2021, down from $29.5 billion in 2020 and marking a fourth-straight yr of decline, in accordance with Rhodium Group knowledge.

Including different types of international direct investment, Chinese offers rose to $138 billion in 2021, up from $134 billion in 2020 and $117 billion in 2019, in line with a 71% enhance in mergers and acquisitions globally between 2021 and 2020, the discharge mentioned.

Chinese companies’ direct investment in native subsidiaries, often called greenfield investment, in Europe and North America grew final yr to $5.5 billion, from $4.7 billion in 2020 and $3.6 billion in 2019, the information confirmed.

The progress final yr got here from elevated investments in Europe.

Several of the brand new greenfield tasks the discharge listed for Chinese companies had been of investments in the electrical car supply chain in Europe.

For instance, Chinese battery big Contemporary Amperex Technology (CATL) broke floor on its first overseas factory in Germany in late 2019 and plans so as to add as much as 2,000 jobs there by 2025, with up to 1.8 billion euros ($2.03 billion) in investment.

The whole worth of this and different offers in the auto supply chain may exceed $14.5 billion in the following two years, in accordance with the Baker McKenzie launch.

The enlargement comes as Chinese electric car start-ups like Nio look to Norway, Germany and other European markets. Major American and European automakers are additionally rapidly shifting to electrical car manufacturing.

“Chinese EV companies are eager to build out their own supply chains so they can leapfrog traditional car manufacturers and jump to the cutting edge,” Mark Witzke, an analyst at Rhodium Group, mentioned in an emailed assertion.

“Using a combination of both acquisitions and greenfield investment, Chinese companies have been going worldwide in order to build out these supply chains,” Witzke mentioned. “It will likely be a growing area of investment as shortages and competition over acquiring EV materials continues. While many of these companies are incentivized by state direction or subsidies, it is mostly private companies rather than [state-owned enterprises] driving this trend.”

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Latin America appears to be like to China, away from the U.S.

Part of the build-up of Chinese investment in the electrical car supply chain is concentrated in Latin America.

Chinese mining companies have spent greater than $4 billion on lithium and cobalt mining and processing belongings in Latin America and Africa during the last three years, in accordance with the Baker McKenzie launch.

During the identical time, Chinese state-owned enterprises have spent greater than $13 billion on power utilities and clear power belongings in Chile, Mexico, Brazil and Spain.

Devaluation in Latin American currencies relative to the U.S. greenback has made belongings extra engaging in the area, Alejandro Mesa, Latin American regional coordinator of the worldwide business & commerce follow group at Baker McKenzie, mentioned in the discharge.

“Second, there are an important number of governments who have expressed interest in working with China as a business partner over more traditional partnerships with the US,” Mesa mentioned. “Third, China has more appetite for long-term investment in the region, as it is likely that economies improve in the mid-term to long-term, thus creating a good moment for selling. In 2022, we expect China to invest heavily in telecommunications and infrastructure, apart from a continuation of more traditional investments in commodities.”

Completed Chinese mergers and acquisitions in Latin America reached $3 billion in 2021, the fourth-largest area for offers, the discharge mentioned.

Foreign companies have additionally elevated their investment into China, up by 14.9% year-on-year to 1.1 trillion yuan ($171.88 billion) in 2021, in accordance with China’s Ministry of Commerce.

Investors from Singapore and Germany elevated their investment by 29.7% and 16.4%, respectively, the ministry mentioned Tuesday, with out disclosing figures for different nations.