Research On Factors Influencing The Success Of Chinese Cross-border FDI In US Under The Background Of US-China Trade War

In 2018,the United States initiated US-China Trade War,setting tariffs on industries such as electronics,machinery,equipment,and clothing,which affected bilateral and even international trade.At the same time,Chinese companies’ mergers and acquisitions in the United States appear to be affected,both in terms of volume and amount.This article attempts to analyze the factors that influence the success of Chinese companies’ mergers and acquisitions in the United States in the context of the Sino-US trade war.The author first reviews the theoretical model of overseas mergers and acquisitions,including monopoly advantage theory,product life cycle theory,internalization theory,international production eclectic theory,small-scale technology theory,technology innovation and product upgrade theory,and investment-induced factor combination theory.Similar to the three stages of Chinese companies’ overseas mergers and acquisitions-the germination stage(1982-1991),the steady development stage(1992-2001),and the rapid development stage(2002-present),the stages of Chinese M&A development in US basically follow the same trend.In 2001,with China’s accession to the WTO,Chinese companies began large-scale mergers and acquisitions in the United States.Around 2010,China’s domestic economic restructuring and supply-side reforms spurred technological demand for enterprises and brought a wave of Chinese companies’ mergers and acquisitions in the United States.In addition to the traditional energy industry,in recent years,the largest number of Chinese companies’ mergers and acquisitions in the United States have been in the service industry,machinery equipment and furniture industry,chemical plastics and rubber industry,retail,publishing and printing,and primary sector(mineral agriculture).Afterward,using Zephyr database,the author selects 882 samples from the mainland and Hong Kong M&A in the United States(excluding Taiwan)from January 2000 to January 2020 then uses logistic model to analyze factors that influence the success of Chinese companies M&A in US.The results show that the trade friction between China and the United States in 2018 has a significant impact on the success rate of Chinese companies’ mergers and acquisitions in the United States.The Sino-US trade war has caused the United States to strengthen its national security review,and a large number of Chinese companies are facing greater resistance in US mergers and acquisitions.At present,Chinese companies’ mergers and acquisitions in the United States are relatively low concerning the primary industry(agriculture,mining,etc.),retail trade,chemical industry,education and medical industry,and metal industry.In terms of approval of Chinese M&A application,based on the safety review standards of the CFIUS,M&As of SOEs in the United States face greater resistance than private companies.Besides,due to lack of comprehensive understanding of the review standard and different conditions in the states and its industries,hiring a professional consultant team can improve the success rate of Chinese mergers and acquisitions.In terms of mergers and acquisitions,more and more companies choose to use direct mergers and acquisitions,equity acquisitions,capital increases,and joint ventures rather than greenfield investments in the United States for direct investment.The intensified review by the US side has made it more difficult to invest in greenfield investment,and the success rate of equity investment or direct acquisition is higher.In terms of geographical distribution,Chinese companies’ direct investment in the United States is mainly concentrated in California,New York,Texas,Delaware,and Florida.Among them,the number of mergers and acquisitions in California is the highest and the success rate is high.California has advanced technology level,developed service industry,high-end technical talents and exchange experience for Chinese companies,and has become a popular area for Chinese companies to invest.As US M&A approvals become more stringent,California’s welcome policy on technology mergers and acquisitions will continue to be the first choice for Chinese technology companies to invest in the US.Texas has a complete infrastructure,a rich transportation network,preferential tax policies,and a developed energy,chemical,and electronics industry.However,compared with California,there is no preference policy for Chinese companies.At the same time,energy and chemical industry is also a sensitive industry for US security review.Therefore,the success rate of mergers and acquisitions is low.Based on the above analysis,the following suggestions are made for future Chinese companies’ direct investment in the United States:First,cultivate core advantages and improve their management and technical capabilities to deal with the risks of mergers and acquisitions caused by the Sino-US trade war;second,hire a professional consultant team to analyze the target and also the policy environment of different industries in each state,so as to choose regions with lower risks for direct investment.The third is to enrich direct investment method,such as direct acquisitions,equity investment,capital increase and other methods to reduce approval risks.