Chinese companies are investing more than ever in the U.S. – a trend that’s likely to continue as they look to diversify and hedge against slowing domestic Chinese growth.

 

Investments from Chinese companies in the first quarter of this year reached a record-breaking $26.7 billion in the U.S., according to a market research firm. That’s nearly double the record-breaking $13.3 billion Chinese companies invested in the U.S. in all of 2015. 

 

Chinese overseas investments have been growing by about 30% a year for the past decade but jumped abruptly in the last 6 months as jitters about a volatile domestic stock market as well as China’s slowing growth made overseas acquisitions very attractive. The Shanghai Composite Index dropped more than 40% between June and August last year. Economic growth in China slowed to a 25 year low in 2015 at 6.9%.

 

Concerns about yuan depreciation are also pushing Chinese companies overseas to hedge against further depreciation. The Chinese yuan depreciated steeply against the U.S. dollar in January and though it’s since stabilized, concerns remain.

 

 

Beyond recent events, China’s buying spree in the U.S. is part of long-term secular trend. Chinese regulators have liberalized rules restricting outbound flows in the last 10 years. Moreover, there’s now a wider range of companies eyeing overseas assets. In the past it was primarily Chinese state-owned companies were able to invest outside of China. Though the largest deals are generally by state-owned enterprises, private Chinese companies are now responsible for the majority of overseas transactions.

 

“As the Chinese economy matures, companies are becoming more interested in building global value chains,” said Thilo Hanneman, an economist at another research firm. Chinese companies didn’t have the political freedom in the past to invest overseas so it wasn’t on the radar, they’re just starting to think about global competitiveness and offshoring, he continued.

 

It’s not just the U.S. that’s seeing increased investment from China. In all, Chinese and Hong Kong companies invested $84.5 billion overseas during the first quarter. Though Chinese companies usually account for less than 10% of cross-border deals; this year they are making up nearly one third, the firm found.

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