Examining China's Investment Record In U.S. Companies

How many Chinese companies have already bought U.S. businesses? David Greene talks to Dexter Roberts, Beijing bureau chief for Bloomberg Businessweek, about Chinese investment in the U.S.

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DAVID GREENE, HOST:

As we just heard, Bloomberg has been doing some reporting on this issue, and we've reached out to Dexter Roberts. He's China bureau chief for Bloomberg Businessweek.

Dexter, thanks for coming on the program.

DEXTER ROBERTS: Thank you.

GREENE: So, according to some estimates, this could be the biggest single Chinese investment in the United States to date. I mean, how significant is this?

ROBERTS: It is a very big deal, and the $5 billion would make it the largest deal so far. It's hardly the only one we've seen. We've seen, I think, about 650 deals over the last decade-plus, and those together amount to about $25.4 billion. So this deal would add beyond $30 billion.

GREENE: OK, 650 deals over the last decade. This is Chinese companies buying U.S. firms?

ROBERTS: That is right.

GREENE: And what does that say about what the Chinese are interested in right now? Is this something they're becoming more and more eager to do?

ROBERTS: Absolutely. There's definitely a real eagerness right now. The Chinese companies have, for many years, viewed American brands, American technology as some of the most advanced and desirable in the world. So that's not new.

What's new now is you have the rise of a lot of very cash flush Chinese companies. They feel a new confidence about buying up assets abroad, and when they look at opportunities right now, American companies are often at the very top of their list.

GREENE: What do these deals usually mean for American companies? I mean, do U.S. firms usually have to totally change the way they do business, or do dictates come from China? What happens?

ROBERTS: Very hard to say what any one deal is going to do because, obviously, there have been so many, and they're across different industries. One thing that the Chinese companies are very aware that they are lacking is real management skill, knowledge of how to operate globally. And so there is - and we've seen so far a tendency to actually want to tap the management that exists in these companies they are acquiring, rather than getting rid of them, as some of us might fear.

That isn't always an easy thing to do, integrating those people into a Chinese company, which may be a very, very different beast. It's not always the smoothest process.

GREENE: A totally different workplace culture, I would imagine. But it sounds like China actually wants to learn from the management style of Americans when they come in and buy these companies.

ROBERTS: I think that's very true. We saw that with one of the very early big deals when Lenovo bought the IBM PC business. They have dual headquarters now in the United States and in China, and they have maintained a lot of the original management from that purchase.

GREENE: What do we know about the company that is trying to buy Smithfield? I mean, is it state-owned? Is it private?

ROBERTS: Well, I believe it's technically a private company. Getting to the provenance of Chinese companies is not always the easiest thing to do.

GREENE: I can imagine.

ROBERTS: Often, companies that are called private are very closely tied into different government ministries or government agencies. Shuanghui is best known -unfortunately for them - for the food safety scares that created a tremendous public relations blow for the brand here in China a couple years ago when they were doctoring their pork with Clenbuterol - a substance that is banned in the United States - to make the pork leaner.

GREENE: Something we just heard about in that piece a few minutes ago. Let me just ask you, how does Chinese investment in the United States compare to U.S. investment in China?

ROBERTS: Well, at this point, it is still significantly smaller. U.S. companies have been doing this, investing into China, for a much longer time. Investment now by U.S. companies totals upwards of $70 billion. China now, as of the end of the first quarter of this year - and not including this latest deal if it were to go through - is about $25 billion. So it's just a little over a third the size.

It is, however, growing very fast. Now, this deal, like most Chinese companies that come in, is certain to face regulatory scrutiny. As we heard earlier, national security concerns could be raised. They could rule that there is a national security issue here and block the deal. They've done that, certainly, in the past, with other Chinese companies.

GREENE: And we should stress that this deal is not final yet, so we'll be following up with you perhaps in the future. Dexter Roberts, thanks so much for joining us.

ROBERTS: Thank you.

GREENE: He's the China bureau chief for Bloomberg Businessweek.

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