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Which States Get the Most Chinese Investment?

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Which States Get the Most Chinese Investment?

Which States Get the Most Chinese Investment?

Part of being a global superpower is having some money to throw around.

Want to fund a giant 80 million person megacity in the Pearl River Delta for $322 billion? Piece of cake.

Re-build the Silk Road for up to $1 trillion? Not an issue.

But China doesn’t only show off its deep pockets domestically. The country has also been extremely active on the global market, buying up everything from natural resources in Africa to luxurious real estate in Manhattan. In total, Chinese companies have spent over $1 trillion on overseas investment over the last decade, and this has only accelerated in recent years as investors seek to acquire safe haven assets abroad.

America First?

Today’s infographic comes from SCMP, and it shows where Chinese overseas investment has been going, with a particular focus on the United States between 2000 and 2016.

Cumulatively, China has put $109.5 billion into the U.S. during this time period, with about 70% of that money coming from private companies. The sectors that have received the most Chinese investment so far include real estate and hospitality ($29.5 billion), information technology ($14.2 billion), energy ($13.4 billion), and entertainment ($8.8 billion).

According to Forbes, here were the five biggest investments made in the U.S. in 2016:

1. HNA Tourism Group gets 25% stake in Hilton for $6.5 billion
This deal helps Chinese conglomerate HNA and Hilton to take advantage of China’s growing tourism market both in China and internationally.

2. Tianjin Tianhai buys Ingram Micro for $6.1 billion
This is the biggest purchase of an American information technology company by a Chinese firm so far. Ingram Micro is the world’s largest wholesaler in technology products and services.

3. Haier Group buys GE’s appliance business for $5.6 billion
Haier is a massive consumer electronics and appliances company in China, with roughly $30 billion of revenue per year. However, the company has yet to make inroads in the North American market. This made buying GE’s appliances division a very strategic opportunity for the company.

4. Anbang Insurance pays $5.5 billion for Strategic Hotels And Resorts
One of China’s largest insurance companies bought 15 luxury properties, including the Four Seasons in Washington, D.C. and the JW Marriot Essex House in New York. The deal was originally valued at $6.5 billion, but one of the hotels was dropped after security concerns were raised due to its proximity to a U.S. naval base in San Diego. That property is worth approximately $1 billion.

5. Dalian Wanda buys Legendary Entertainment for $3.5 billion
Legendary Entertainment is a Hollywood production company that has the rights to popular films such as The Dark Knight, Inception, Jurassic World and Straight Outta Compton.

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China

A Timeline of U-Turns from the Chinese Market

It’s hard to ignore the massive economic opportunities available in the Chinese market, but it’s also notoriously difficult to succeed in.

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China’s economic surge is one of the biggest stories of the 21st century.

Hundreds of millions of people have been lifted out of poverty, and China’s swelling middle class has attracted the interest of Western companies.

As many American companies have discovered, doing business in China is far from straightforward. Recent history is littered with examples of companies that entered the Chinese market to great fanfare, only to retreat a few years later.

Calling Off The Offensive

Today’s infographic highlights 11 companies that ended up tapping the brakes on their ambitious forays on the other side of the Pacific.

Then, we take a look at the factors that influenced these strategic withdrawals.

Here are some high profile examples of corporate u-turns by American companies operating in the Chinese market:

Google

When Google China’s search engine was launched in 2006, the company had made the controversial decision to censor search results within the country. Google publicly displayed a disclaimer indicating that some results were removed, which created tensions with the Chinese government.

For a while, things seemed to be going well. Even though a domestic company, Baidu, had captured the majority of the Chinese search market, Google did have a respectable market share of about 30%.

Google China’s fortune took a turn for the worse in 2010 after a major hack – Operation Aurora – exposed user data as well as intellectual property. The hack, which originated from within China, was the last straw for Google’s executive team. After one last ditch effort to provide unfiltered search results within China, the company retreated beyond the firewall.

Amazon

Amazon was an early entrant into the Chinese market. In 2004, the company acquired Joyo – an online shopping site – which was eventually rebranded to Amazon China in 2011.

Amazon China achieved some early success hitting a market share of around 15%, but today, that market share has eroded to less than 1%. Facing nearly insurmountable competition from domestic e-commerce platforms like JD and Taobao, the company recently announced it would be exiting the Chinese market.

Uber

After arriving fashionably late for the ride-hailing party in 2014, it quickly became clear that Uber was facing an uphill battle against well-funded domestic rivals. After only two years, Uber elected to u-turn out of the Chinese market.

Though Uber’s tactical exit from China is often viewed as a failure, the company has earned upwards of $8B through its sale to competitor Didi Chuxing.

A Two-Way Street

Now that red-hot growth at home is beginning to taper off, a number of Chinese companies have begun their push into other markets around the world. Much like their American counterparts, brands pushing beyond China’s borders are seeing varied success in their expansion efforts.

One high-profile example is Huawei. The telecommunications giant has been making inroads in countries around the world – particularly in emerging markets – but has seen pushback and scrutiny in a number of developed economies. Huawei has become a lightning rod for growing concerns over government surveillance and China’s growing influence over the global communications network.

Already, Australia has blocked the company from participating in its 5G network, and in the United States, government agencies are banned from buying Huawei gear.

If negative sentiment continues to build, it remains to be seen whether Huawei and other Chinese companies will follow the playbook of American brands in China, and turn the car around.

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Chart of the Week

The Best and Worst Performing Wealth Markets in the Last 10 Years

This telling chart shows how national wealth markets have changed over the past decade, highlighting the biggest winners and losers.

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The Best and Worst Performing Wealth Markets

A lot can change in a decade.

Ten years ago, the collapse of Lehman Brothers sent the world’s financial markets into a tailspin, a catalyst for years of economic uncertainty.

At the same time, China’s robust GDP growth was reaching a fever pitch. The country was turning into a wealth creation machine, creating millions of newly-minted millionaires who would end up having a huge impact on wealth markets around the world.

The Ups and Downs of Wealth Markets (2008-2018)

Today’s graphic, using data from the Global Wealth Migration Review, looks at national wealth markets, and how they’ve changed since 2008.

Each wealth market is calculated from the sum of individual assets within the jurisdiction, accounting for the value of cash, property, equity, and business interests owned by people in the country. Just like other kinds of markets, wealth can grow or shrink over time.

Here are a few countries and regions that stand out in the report:

Developing Asian Economies
In terms of sheer wealth growth, nothing comes close to countries like China and India. The size of these markets, combined with rapid economic growth, have resulted in triple-digit gains over the last 10 years.

For the world’s two most populous countries, it’s a trend that is expected to continue into the next decade, despite the fact that many millionaire residents are migrating to different jurisdictions.

Mediterranean Malaise
European nations saw very little growth over the past decade, but the Mediterranean region was particularly hard-hit. In fact, eight of the 20 worst performing wealth markets over the last decade are located along the Mediterranean coast:

Rank (Out of 90)Country% Growth (2008-2018)
89🇬🇷 Greece-37%
87🇨🇾 Cyprus-21%
86🇮🇹 Italy-14%
85🇪🇸 Spain-13%
84🇹🇷 Turkey-11%
82🇪🇬 Egypt-10%
80🇫🇷 France-7%
76🇭🇷 Croatia-6%

European Bright Spots
There were some bright spots in Europe during this same time period. Malta, Ireland, and Monaco all achieved positive wealth growth at rates higher than 30% over the last 10 years.

Australia
While it’s expected to see rapidly-growing economies as prolific producers of wealth, it is much more surprising when mature markets perform so strongly. Singapore and New Zealand fall under that category, as does Australia, which was already a large, mature wealth market.

Australia recently surpassed both Canada and France to become the seventh largest wealth market in the world, and last year alone, over 12,000 millionaires migrated there.

Venezuela
The long-term economic slide of Venezuela has been well documented, and it comes as no surprise that the country saw extreme contraction of wealth over the last decade. Since war-torn countries are not included in the report, Venezuela ranked 90th, which is dead-last on a global basis.

Short Term, Long Term

In 2018, global wealth actually slumped by 5%, dropping from $215 trillion to $204 trillion.

All 90 countries tracked by the report experienced negative growth in wealth, as global stock and property markets dipped. Here’s a look at the wealth markets that were the hardest hit over the past year:

Wealth MarketWealth growth (2017 -2018)
🇻🇪 Venezuela-25%
🇹🇷 Turkey-23%
🇦🇷 Argentina-20%
🇵🇰 Pakistan-15%
🇦🇴 Angola-15%
🇺🇦 Ukraine-13%
🇫🇷 France-12%
🇷🇺 Russia-12%
🇮🇷 Iran-12%
🇶🇦 Qatar-12%

The future outlook is rosier. Global wealth is expected to rise by 43% over the next decade, reaching $291 trillion by 2028. If current trends play out as expected, Vietnam could likely top this list a decade from now with a staggering 200% growth rate.

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