Chinese FDI in US tripled to $46 billion in 2016

Chinese foreign direct investment in the US in 2016 more than tripled from 2015 to $46 billion, with Chinese companies adding 1,300 new operations, according to a report.

Chinese-owned companies now employ more than 140,000 Americans, with companies increasing their presence in the South and Midwest "significantly," though their investments are still most keenly felt in coastal economies, according to the report — New Neighbors: 2017 Update — on Chinese investment in US congressional districts, published by the National Committee on US-China Relations and the Rhodium Group on Tuesday.

Of the 435 congressional districts, 425 received Chinese investments last year.

The 12th district, New York City, received the most — $8.6 billion. It consisted of real estate and an insurance company buying a stake in Sotheby's auction house.

New York was followed by $3.8 billion for Illinois' 7th district; $3.6 billion for North Carolina's 4th; $3.3 billion in Kentucky's 3rd and $3.1 billion in California's 12th.

The most jobs generated by a Chinese investment were in Kentucky's third district of Louisville, 6,020, where Haier acquired GE Appliances for $5.6 billion.

Most of the investments were in mergers and acquisitions, though in major gateway cities like New York and San Francisco, real estate and hospitality investments were more prevalent. Southern states like Georgia saw investment in manufacturing or R&D facilities for Chinese or Chinese-owned companies.

In addition to Haier's acquisition of GE Appliances, the largest acquisitions included HNA Group's $6 billion purchase of Ingram Micro and Anbang Insurance Group's $5.5 billion investment in a real estate portfolio from Strategic Hotels, the report said.

The report found that Chinese investment in high-tech and innovation-intensive industries has grown rapidly in the last three years, increasing from $2 billion in 2005 to roughly $12 billion last year.

"Chinese entities also continued to invest in early-stage growth companies in America. While these investments have raised some security concerns, they have provided an important source of financing for many US technology companies," the report said.

Authors of the report also found that Chinese investors "do not have a greater propensity than other foreign investors for moving R&D and other high-value added activities back to their home country post-acquisition."

While 2016 saw record Chinese investment, the current investment climate makes it hard to gauge 2017, the report said. Likely changes to US investment policy, an uncertain trajectory for the US-China relationship, and capital controls are headwinds, the authors said. Trade barriers, if enacted, may lead to an increase in greenfield investments so Chinese companies can localize production "inside the tariff wall," according to the report.

US investment policy could face a "critical juncture" in 2017, due to the Trump administration's potentially tougher stance on China, the report said. Members of Congress "must balance ‘better' defensive measures against the opportunities foreign investment brings to their states and districts, while remembering that competition to attract footloose business and the taxes and paychecks they bring is stronger than ever," according to the report.