Chinese Investors Still Leery of U.S. Acquisitions After Oversight Changes

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Chinese investors have shied away from buying U.S. companies following changes to U.S. foreign investment law, according to a report from the Committee on Foreign Investment in the U.S.

Requests from China-based acquirers for clearance to buy U.S. companies in 2021 remained down from 2018, when the U.S. passed the Foreign Investment Risk Review Modernization Act, according to Cfius, which released its 2021 annual report on Tuesday.

“We’ve definitely seen a decline in China buying in the U.S.,” said Christine Daya, a Washington, D.C.-based partner at the law firm DLA Piper. “Things are really down…because of Firrma.”

Cfius, an interagency committee run by the U.S. Treasury Department, reviews foreign investments in U.S. companies or real estate for possible national security concerns and can recommend the president block or unwind deals. Firrma gave the committee more resources and a broader purview, a move widely seen as aimed at the risks posed by Chinese investment stateside.

In 2021, 45 Chinese investors made requests with Cfius asking for a green light on corporate transactions, the report said, compared with 55 in 2018.

From 2016-2018, Chinese investors filed an average of 56 notices a year, compared with 32 filings on average in 2019-2021.

The relatively depressed number last year was particularly striking, given that 2021 saw a record level of merger and acquisition activity. The total value of global M&A transactions reached about $5.9 trillion in 2021, up nearly 50% from 2018’s $4.0 trillion figure, according to data provider Refinitiv.

Heightened Cfius filing requirements for investors controlled by foreign governments also could be affecting the level of Chinese investment, Ms. Daya said.

In addition to powers to review a broader set of transactions, the 2018 law also directed more resources to Cfius, helping it to toughen its enforcement.

Though most transactions reviewed come to the committee because the parties filed notices, the committee said it had looked at 135 transactions on its own initiative in 2021, up from 117 in the previous year.

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Write to Richard Vanderford at richard.vanderford@wsj.com

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