Forget the Headlines: Chinese Buying Big in US
News that a Chinese firm plans to acquire one of the largest food companies in the United States came as surprise to many market-watchers, but Chinese investment in the U.S. is at an all-time high—and is only likely to increase.
Prior to the proposed deal between Smithfield Foods and acquirer Shanghui International, the single largest Chinese investment in America had been more mundane than the energy and resource companies that China gets headlines for buying: It was a movie theaters. But to a large extent, that type of acquisition explains the broader story about China's strategy when it comes to U.S. investment.
AMC Theaters, previously owned by a group of U.S. private equity firms, is now a division of Dalian Wanda of China—a huge entertainment conglomerate that spent $2.6 billion in 2012 on the theater chain. With the purchase, Wanda controls more ticket sales in the world than any other company.
(Read More: Proudly Built in the USA—by the Chinese)
It's no accident that the largest U.S. purchase so far is for a company as non-controversial as AMC. Chinese businesses—many of them government-owned—have repeatedly been rebuffed by the U.S. government when trying to buy American firms that control natural resources or advanced technology.
It is either a testament to the tenacity of the Chinese, or simply a reflection of the gobs of money they have, that despite all the negative headlines, Chinese investment in the U.S. hit an all-time record in 2012: $6.5 billion. It will likely surpass that level in 2013, according to Rhodium Group, which does detailed tracking of Chinese investment. The Heritage Foundation, which tracks Chinese investment, says that the U.S. was the single biggest recipient of Chinese overseas investment last year, eclipsing Australia for the first time.
"We are in the midst of a structural growth story that will transform the China-U.S. investment relationship from a one-way street into a two-way street," says Thilo Hanemann of Rhodium.
(Read More: Has Hollywood Sold Out on Tibet?)
CNBC profiled three Chinese-owned companies in the U.S. in order to explore what kind of deals and investments are getting done, and the motivations behind them.
AMC Theaters, International Vitamin Corporation, and China Construction of America represent a cross-section of Chinese-owned firms. Two are quite large, while one is comparatively small. Two are private, while one is owned by the Chinese government. Two are new to the U.S., while one has been here for 28 years.
Regardless, the goal of all the three CEOs is the same: growth.
Jianlin Wang, chairman of Dalian Wanda, which bought AMC, wants his company to reach $100 billion in revenue by 2020, up from the current level of $30 billion. While his home market China is the fastest growing movie market in the world, he'll still need overseas acquisitions to achieve his goal.
"The acquisition of AMC is just the start," says Wang, and "probably before the end of the year we may complete one or two more deals." He says he expects to spend another $7 billion in the U.S. by the end of this decade.
While there may be critics at the federal level, the mood is just the opposite at the state level. New Jersey's lieutenant governor has visited IVC's headquarters, and has asked CEO Dai to speak to other visiting Chinese executives to convince them to invest in NJ as well.
Dai says he tells those visiting executives that investing in the U.S. is a no-brainer compared with other parts of the world that may be afflicted by instability, wars or corruption. In the United States, he tells them, "you just focus on what you are doing and your hard work will be rewarded. You don't have to worry about other things like connections, or relationships."
Chairman Wang says that while members of Congress may be worried, officials at the state, city and municipal level "are quite welcome to Chinese investment, because such investment can create job opportunities and boost economic development."
To be sure, even though Chinese investment is at a record level, it is still relatively small compared to the size of the U.S. economy. According to the Heritage Foundation, total Chinese investment in the U.S. since 2005 stands at $54 billion, compared with an overall wealth stock in the U.S. of $60 trillion.