Chinese companies boost overseas investment in consumer products, EV

BEIJING — Chinese companies invested more in consumer sectors and the electric vehicle supply chain worldwide, even as geopolitics restricted overall outbound capital flows, according to a report released Wednesday by Baker McKenzie and Rhodium Group.

Consumer products and services held the largest share of completed mergers and acquisitions last year, at $5.2 billion, up from $1.1 billion in 2020, according to the data. That still fell short of pre-pandemic levels of $10 billion in deals in 2019.

However, White House restrictions on inbound Chinese investment in tech and Beijing’s efforts to keep capital within national borders have contributed to a decline in Chinese overseas deals. The high-tech and real estate sectors have been particularly hard hit, according to a release.

Overall, completed overseas mergers and acquisitions by Chinese companies dropped to $23.7 billion in 2021, down from $29.5 billion in 2020 and marking a fourth-straight year of decline, according to Rhodium Group data.

Including other forms of foreign direct investment, Chinese deals rose to $138 billion in 2021, up from $134 billion in 2020 and $117 billion in 2019, in line with a 71% increase in mergers and acquisitions globally between 2021 and 2020, the release said.

Chinese companies’ direct investment in local subsidiaries, known as greenfield investment, in Europe and North America grew last year to $5.5 billion, from $4.7 billion in 2020 and $3.6 billion in 2019, the data showed.

The growth last year came from increased investments in Europe.

Several of the new greenfield projects the release listed for Chinese companies were of investments in the electric vehicle supply chain in Europe.

For example, Chinese battery giant Contemporary Amperex Technology (CATL) broke ground on its first overseas factory in Germany in late 2019 and plans to add up to 2,000 jobs there by 2025, with up to 1.8 billion euros ($2.03 billion) in investment.

The total value of this and other deals in the auto supply chain could exceed $14.5 billion in the next two years, according to the Baker McKenzie release.

The expansion comes as Chinese electric car start-ups like Nio look to Norway, Germany and other European markets. Major American and European automakers are also quickly shifting to electric vehicle production.

“Chinese EV companies are eager to build out their own supply chains so they can leapfrog traditional car manufacturers and jump to the cutting edge,” Mark Witzke, an analyst at Rhodium Group, said in an emailed statement.

“Using a combination of both acquisitions and greenfield investment, Chinese companies have been going worldwide in order to build out these supply chains,” Witzke said. “It will likely be a growing area of…