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The Honolulu Advertiser
Posted on: Monday, January 25, 2010

Chinese buy $3.9B in American assets


By KATHY CHU
USA Today

HONG KONG For the first time, Chinese investment in U.S. companies has eclipsed U.S. purchases of Chinese entities, a trend analysts say is fueled partly by depressed American assets.

In 2009, Chinese buyers snapped up $3.9 billion of U.S. assets, nearly four times the level in 2008, says Dealogic, a data-tracking firm. By comparison, U.S. buyers plowed $3 billion into Chinese entities last year, down 80 percent from 2008.

It's too early to tell whether this pattern will hold. Chinese buyers represented only 3 percent of the $118.7 billion in U.S. foreign investment last year. Yet China ranked as the ninth-largest foreign investor in the U.S., and among the minority that increased its stake amid a sputtering global mergers-and-acquisitions market.

The development comes at a time when China has overtaken the U.S. as the world's top auto market and is expected to soon edge out Japan as the world's second-largest economy behind the U.S. Analysts say that as China's economy grows, so does its desire to expand its global presence through acquisitions.

"It's a tremendous phenomenon that the Chinese are exporting capital aggressively," says Lawrence Chia, head of Deloitte China M&A Services. "There's a big push toward domestic consumption, so they're going after brands for their market."

U.S. companies are attractive targets because of slumping stock prices that make investment less expensive. By buying up U.S. assets, China is also hedging its currency risks, analysts say, because it holds a significant portion of its foreign reserves in U.S. dollar-denominated assets.

"The U.S. dollar has lost value, so it's better to put it in hard assets," says Greg Miao, a partner at Skadden Arps Slate Meagher & Flom law firm.

Globally, China has shown significant interest in acquiring natural resources and industrial firms in the engineering, auto and technology fields. Recent Chinese investment in the U.S., however, has favored the financial sector: The Chinese government took high-profile stakes in private-equity firm Blackstone and financial giant Morgan Stanley a few years ago.