Weak Dollar Fuels China's Buying Spree Of U.S. Firms
Monday, January 28, 2008
SHANGHAI -- From his posh office in a coastal city in eastern China, millionaire Zhou Jiaru oversees more than 100 workers at an auto parts refurbishing factory he purchased in a struggling manufacturing town on the other side of the world.
Zhou's new company is in Spartanburg, S.C.
The Chinese entrepreneur bought it from Richard Lovely, a 56-year-old industrial engineer and mechanic who says his business was in dire straits because of competition from abroad.
Zhou's 85 percent stake in the company now known as GSP North America is one example of how the weak dollar and weakening U.S. economy have made the United States a bargain for overseas companies shopping for investments.
In 2007, acquisitions in the United States by foreign ventures hit $407 billion, up 93 percent from the previous year, according to Thomson Financial. The top countries investing were Canada, Britain and Germany; the Middle East and Asia -- especially China -- are quickly catching up.
The biggest deals in recent months have involved Wall Street firms hit by losses from exposure to mortgage-related investment vehicles.
Saudi Prince Alwaleed bin Talal is once again coming to Citigroup's rescue. Canada's Toronto-Dominion Bank is buying an $8.5 billion share of Commerce Bancorp. Singapore's state-run Temasek Holdings purchased a stake in Merrill Lynch valued between $4.4 billion and $5 billion. And the sovereign wealth fund that invests the Chinese government's hard currency is injecting $5 billion into Morgan Stanley, while Citic Securities, a private Chinese firm, is investing $1 billion in Bear Stearns.
But the investment hasn't stopped there. Smaller companies in remote parts of the United States are also being bought out.
"The U.S. dollar is getting weaker and weaker, and many medium to small U.S. companies are in economic crisis. So they need investments from China. It is very good timing," said Yu Dan, a representative for the state of Pennsylvania in China.
Yu, who is one of about 30 people in China who represent American cities and states, said at least six Chinese companies are in the process of closing deals in Pennsylvania. One will make some purchases in the food industry. Another will invest in the wood industry, because as Yu put it, "Pennsylvania has very good hardwood resources, and the aboriginal people in the north Pennsylvania woods are good workers."
Aboriginal people? The Amish, Yu clarified.
As the dollar's value against other currencies fluctuates, the tricky part for foreign investors is buying at the right time. When the dollar is falling, there's a danger in overpaying. The $3 billion stake that China Investment Corp. bought in Blackstone last May, for instance, is now worth closer to $2 billion.