Chinese Investment in US May Break Record in 2013
Investors around the world may be cooling on the U.S., but not China.
Chinese investment in the United States will likely break another record in 2013, according to research firm Rhodium Group. That's after a record year in 2012 with deals worth more than $6.5 billion, a 12 percent increase from the previous record of $5.8 billion in 2010.
The number reflects direct investment in U.S. businesses and does not include the estimated $2 Trillion in U.S. Treasurys held by the Chinese government.
"Given that we already have $5 billion worth of deals lined up it is very likely that 2013 will be another record year. Policy action in China that demonstrates commitment to structural reforms could further add to the momentum, as Chinese firms are seeking access to technology and know-how to prepare for a new era of Chinese growth," said Thilo Hanemann, author of a new Rhodium report about Chinese foreign direct investment in the United States.
In fact, the Chinese seem to be some of the few willing to increase investment in the United States since the financial crisis. From the first three quarters of 2007 to the first three quarters of 2012, Middle East Investment in the US is down 86 percent, Canada down 75 percent, and Europe down 49 percent, according to the Bureau of Economic Analysis.
But China? It's up 321 percent in the same time period. (Read More: Why One of China's Richest Men Is Squaring Off With Obama.)
Hanemann thinks the government data undercounts the number, because it does not include flows through offshore financial centers. Rhodium estimates the increase in Chinese investment to the U.S. is actually a whopping 1300 percent.
To be sure, China is still small relative to other parts of the world; less than 1 percent of total foreign investments in the United States. However, that number is only expected to grow as the country and its growing businesses continue to look for investments outside of their home country, as they search for commodities, and value-added know-how. (Read More: World's No. 2 Economy Is Setting Up for Solid 2013.)
The biggest deals in 2012 were Sinopec's $2.5 billion stake in Devon Energy, and Dalian Wanda's $2.6 billion purchase of movie-theater chain AMC. Additionally, Wanxiang took a $420 million stake in Great Point Energy.
Still waiting for regulatory approval: A Chinese consortium has agreed to purchase an 80 percent stake in AIG's aviation leasing unit Lease Finance Corp for $4.2 billion; auto parts maker Wanxiang has won the non-defense business of battery producer A123 Systems in a bankruptcy auction. BGI Shenzhen is waiting for regulatory approval to purchase California biotech company Complete Genomics for $118 million.
"In short, we are in the midst of a structural growth story that will transform the China-US investment relationship form a one-way street into a two-way street" wrote Thilo Hanemann, the report's author.
(Read More: Why China May Be Facing US-Style Credit Crunch.)
Of course, Chinese investment in U.S. firms was also controversial in 2012. A report by two members of the U.S. House Intelligence Committee attacked Chinese telecom firms that wanted to invest in the United States, Huawei and ZTE, suggesting their technology could be used for spying.
Additionally, members of the intelligence community are suspicious of Chinese firms' motives, particularly because many of the firms are state-owned enterprises; in other words, owned and ultimately controlled by the Chinese government.
—By CNBC's Michelle Caruso-Cabrera; Follow her on Twitter: @MCaruso_Cabrera