The United States continues to be an attractive destination for foreign direct investment. The continued appeal results from the large U.S. domestic market, strong economic conditions, and the new lower corporate tax rate instituted under President Trump.
Many foreign companies interpret the U.S. trade policies as strongly advantageous, and think the best path to gain access to U.S. opportunities is through foreign direct investment.
American and global investors alike are risk adverse. Investors are rightfully concerned about high-profile corruption flourishing in many of the major emerging markets, including but not limited to Russia, Brazil, and South Africa. Understandably, they view the US and the West favorably in this light.
Over the past few years, there’s been a significant surge in Chinese investment in the United States, especially in M&A. Both private and state-owned Chinese investment groups are trying to find ways to develop business in what they perceive as the most desirable consumer market in the world.
Chinese investments span across all sectors, with a significant focus on innovation. The IT sector is the source of much deal-making activity as investors seek to position their companies to compete in the 21st century digital economy.
Foreign direct investment in the U.S., provide much-needed growth capital, along with manufacturing excellence, and competency in a responsive supply chain; Optimally, over time an interdependent relationship develops: Material value is added to the acquired company, and a mutually beneficial learning environment follows.
Major factors for increased Chinese M&A activity in the U.S. include:
- Availability of funds, both private and public
- Strong macroeconomic environment
- Favorable regulatory environment
- Foreign exchange dynamics
- Lower risk than in their country
- Abundance of opportunities
Yet with all these positives, numerous Chinese investments in both global and American brands have been only moderately successful.
Go Global’s Retail experience is in the consumer goods vertical, particularly in the fashion retail industry, and has witnessed that the most successful foreign investors are those that capitalize and build their knowledge of the local economy.
Oftentimes the acquiring company uses its traditional operational model, developed in their local market. Go Global Retail believes that the best approach is to partner local institutional experts with foreign investors, to develop and implement a long-range plan for regional and global expansion of the brand and corporation.
Go Global Retail senior managers have observed that successful Chinese investment companies often adopt a “light touch” engagement style, seeking to neither dominate nor change the acquired asset. Equally important for driving corporate revenue, and increasing enterprise value, is the favorable prospects for brand expansion into China. The intelligence the Chinese investors bring to opportunities in their home country is clearly invaluable for American companies.
Go Global Retail understands it’s necessary for U.S. businesses to be thorough in every M&A process, whether the acquirer is from the US, China or anywhere in the world.
Go Global Retail believes that investors will continue to face a volatile global operating environment, and that the United States and the West will continue to be attractive to foreign direct investment. We’re certain that FDI will continue at a robust level, especially in respect to the fashion retail business over the next few years.
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