The Rhodium Group (an economics consultancy) has come out with a really cool interactive map showing “Chinese investment in the United States by industry, year and more.” On the same page as the map are a number of articles playing up the increased investment by Chinese companies into the United States.
The funny thing is that I look at the map, particularly when filtered to just show Chinese investments in 2011, and all I can think is how few there have been. In thinking about my law firm’s own experiences with Chinese investment in U.S. companies, the thing that stands out for me is how many times we have been called in on potential deals that from their inception looked as though they would never happen.
Whenever my law firm is called in to work on a deal that involves a Chinese company paying a large sum of money, we like to predict whether the deal will go through or not. We usually agree. If the deal makes no sense for the Chinese side or if we do not believe the Chinese company has the political or economic wherewithal to make it happen, we both predict the deal will never happen and in those situations it virtually never does. Probably around 75% of the deals that look good end up happening and we usually both predict those will.
Where we have disagreed is on those that look bad, but in which the Chinese company has put down a large and non-refundable deposit. We have had two of those and I have to concede that Steve ended up being right on both of those, with me being wrong. Steve predicted the deals made no sense at all and would not go through. I said that nobody would put down $500,000 in the one case and $300,000 in the other without having already figured out how everything would work. Strangely enough, in both cases the Chinese companies pulled out (and rather early) and forfeited their deposits without even a whimper. In hindsight, I concluded that these companies had plenty of money and desire, but were severely lacking in international knowledge.
What are you seeing out there. China FDI into the United States, today, tomorrow, five years from now or not ever?
