The period April-June 2021 saw an impressive array of investments into China, in a variety of different sectors. Despite political differences, the United States led the way closely followed by Asia and then Europe.
Q2 aggregate amounts were led by real estate, and logistics acquisitions and investments, suggesting that corporate MNC’s are buying into China’s Belt and Road Initiative projects while politicians continue to discredit it. Joint ventures (JV) and minority investments took place in multiple sectors from several Asian countries.
JVs/minority inbound investments were made from several European countries led by German and Scandinavian businesses. The UK saw a handful of small investments/JVs as well as one major exit. A notable next generation investment was made by Germany’s Volocopter, looking to bring flying taxis to China.
The second quarter of 2021 saw China inbound investments/pledges reach US$13.9 billion, down 2.1 percent from US$14.2 billion in Q1 2021, but still well above both Q3 and Q4 2020 levels. These investments were a mixture of controlling inbound acquisitions, minority stakes, JVs, and new plants/operations.
This quarter was led by acquisitions of controlling stakes across financial services, banks, investment banks, securities firms, asset and wealth managers, insurers, real estate, and logistics. We set out this activity by region below.
North America led with US$6.8 billion. Two large acquisitions by Blackstone, one of a Beijing-based commercial developer and one of a leading Chinese data management group, accounted for US$4.3 billion. Canadian-based Brookfield acquired a set of five mainland shopping malls for US$1.4 billion. There was a furry of investments/announcements by leading US financial services groups including JP Morgan – seeking to acquire the remaining 29 percent of its securities joint venture (estimate of US$40-50 million). This follows JPM’s Q1 acquisition of a 10 percent stake in China Merchants Bank, a leader in Chinese wealth management for US$410 million.
Morgan Stanley is interested in acquiring stakes in their Chinese securities and mutual funds JVs (approx. US$150 million)
Goldman Sachs launched its Chinese wealth management JV with ICBC wealth management. Goldman will control 51 percent.
Blackrock announced that it had received its license for a majority owned (50.1 ercent) wealth management JV with CCB and Temasek (Singapore). Blackrock also became the first global asset manager to start a wholly owned onshore mutual funds business.
There were also industrial JVs in lithium batteries, chemicals and gasification, venture capital (VC) and/or private equity (PE) investments into Chinese healthcare, with a focus on biopharma and biotech, into diary and into a newly launched industrial/PE fund for the Chinese beauty market. There were also a few smaller RE acquisitions as well. The quarter ended with Warburg Pincus announcing a JV with China’s Golden Union Group, to acquire under-utilized properties in Shanghai and Beijing and convert them into use, including serviced apartments, creative offices, or mixed-use commercial projects.
Asia Q2 announced deals with disclosed values totaling US$6.1 billion.
Not surprisingly, Hong Kong and Singapore ranked #1 and #2, respectively, by country.
The largest Asian inbound investment was AIA’s acquisition of a 24.99 percent equity stake in China Post Life for US$1.8 billion. Hong Kong also saw a US$500+ million acquisition of a Chinese shopping mall by a REIT and an inbound mainland Chinese hospital acquisition. Singapore saw three real estate/REIT transactions, one of which represented the successful IPO of GLP’s logistics REIT (a landmark China REIT transaction), the launch of DBS’ majority-controlled mainland securities JV, and a private placement by GIC into a leading tech platform.
This quarter also saw inbound JVs/partnerships involving many other Asian countries; Japan (Daiwa securities JV and an EV batteries JV), Korea (biopharma VC investment led by Mirae and a JV in lithium-ion battery recycling), Mongolia (metallurgical coal JV), Thailand (hospitality/hotels entry), and Australia, a US$1.4 billion lithium strategic partnership.
MENA China (Guangzhou) and Israel launched a second Sino-Israel biotech Fund, managed by prominent Israeli professionals, and is to be focused on Israeli and EU biotech companies in phase II/III clinical trials.
Europe (excluding the UK) saw numerous JVs/investments into China, however, very few of these disclosed any value. The aggregate disclosed values for FDI into China amounted to US$750 million.
Germany invested in two China JVs, focused on electric batteries as well as one on fuel cells – all involving leading brands from both countries. There was a JV launched to focus on monorail components, another to bring German flying taxis (Volocopter) into China and one to fund a Series C of a Chinese drone maker. Perhaps the most pressing Q2 German/China JV was the one between Fosun Pharma and BioNTech, which is designed to produce up to 1 billion of additional vaccine doses per year to mainland China, which needs this additional domestic vaccine capacity. (BioNTech also announced that it would be launching new regional vaccine production facility in Singapore).
BASF’s new engineering plastics compounding plant at the BASF Zhanjiang Verbund site (US$10 billion) is also on track with the first production plant to come commence operations at the site in 2022. German inbound VC investment volume was much lower in Q2 versus Q1 as Bertelsmann (BAI) – which made 5 VC investments in Q1, made none in Q2.
BASF and Bosch VC funds saw much lower VC investment activity in Q2.
France saw Sanofi launch a new global research institute in China (its fourth such global institute), Air France/KLM acquired an additional US$200 million to increase its stake in China Eastern (still below 10 percent) and TOTAL released updated data on its solar panel JV (TEESS) with Envision, which appears to be making strides into the Chinese commercial and industrial user segment.
Other European countries
Norway saw two JVs, one to develop offshore wind in the Yellow Sea and one with UAC, a supplier of fiberglass pressure vessels, to build a large-scale production facility in China.
Finland – Finnair announced a new JV with Shanghai’s Juneyao Air to expand air services between Finland and China.
Switzerland – Clariant opened its new production facility for light stabilizers.
Italy – Daerg Chimica, a specialist in car washing business operating in 45 countries, announced the launch of its Chinese business.
Netherlands – LyondellBasell announced that Jiangsu Fenghai will use its Spheripol 400 kilotons per annum (KTA) and Hostalen ACP300 KTA Hostalen technology for its new facility to be built in Lianyungang.
UK – (amounts with disclosed values of estimated US$250 million) – saw the acquisition of a majority (73 percent) stake in a small Chinese industrial company, acquisition of a 10 percent stake in a regional Chinese freight organization, a JV involving China Everbright Fund providing growth capital for IP Group’s China based portfolio companies, a chemical manufacturing JV, a JV in life sciences/AI, a small petrochemicals JV (via Shell), and a data focused JV involving Unilever, Alibaba’s Brand DataBank, and Fudan University.
A sizeable infant formula business exit was made by Reckitt Benckiser, a leading UK consumer health group.
Included in this analysis are transactions and/or investments which have both been signed and announced. Omitted from this analysis are transactions involving publicly traded debt or equities.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
