ANNUAL REPORT

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Chapter 1, Section 2, “State-Owned Enterprises, Overcapacity, and
China’s Market Economy Status.”) Mergers and acquisitions (M&A)
remained the dominant form of FDI flows that year, with Chinese
companies completing over 100 M&A deals worth $13.5 billion. 204
The trend of growing Chinese FDI in the United States reflects a
broader shift in China’s outbound FDI away from natural resource
extraction and energy in developing countries toward a broader
range of industries in high-income economies, such as Europe and
the United States. 205
The sectoral composition of Chinese investment in the United
States has become much more diverse. 206 In 2015, the biggest industries
were real estate and financial services, followed by ICT,
energy, automotive, health and biotechnology, and entertainment.
About two-thirds of total investment went into services, up from 14
percent in 2009. 207 The top three destinations for Chinese FDI were
New York (led by investments in the financial services and real estate
sectors), California (ICT and real estate), and Texas (energy). 208
The increased acquisition of U.S. assets by Chinese companies has
led to growing political concern over the national security risks of
such acquisitions. 209 Chinese firms, which often receive state funding,
have been particularly active in bidding for U.S. technology assets.
For example, technology distributor Ingram Micro announced
in February 2016 that it was being sold to Tianjin Tianhai Investment
for $6 billion. 210 While many analysts anticipate the sale will
go forward without a Committee on Foreign Investment in the United
States (CFIUS) review, a few attempted Chinese acquisitions of
U.S. technology firms have recently fallen apart as a result of CFI-
US scrutiny or even just its likelihood. 211 In February, hard disk
drive manufacturer Western Digital’s sale to China’s Unisplendor
collapsed after CFIUS announced it would review the deal, and the
sale of the lighting division of Dutch electronics firm Royal Philips
was purportedly blocked by CFIUS. 212 Fairchild Semiconductor, another
electronics firm, rejected a bid from a Chinese buyer in February
for fear the acquisition would trigger a CFIUS review. 213
In another example, the acquisition of insurance company Ironshore
by Chinese conglomerate Fosun International came under
CFIUS review after the deal closed in November 2015.* Media reports
indicate the purchase drew CFIUS’s interest because an Ironshore
subsidiary, Wright USA, is a key provider of legal liability
insurance for U.S. intelligence officials. 214
Overall, the data do not demonstrate that CFIUS has been a significant
obstacle for Chinese investment in the United States. In
2014, the latest year for which data are available, China led foreign
countries in CFIUS reviews with 24 reviewed transactions
out of more than 100 total Chinese acquisition deals. 215 Although
the number of Chinese transactions reviewed increased in absolute
terms, it declined as a share of all Chinese acquisitions, and the vast
majority of reviewed transactions proceed. As a percentage of total
* News of the CFIUS review first broke in June 2016. Fosun issued a statement that it and
Ironshore had voluntarily notified CFIUS of the acquisition and both parties “have been working
closely with CFIUS.” Ironshore stated in a July 2016 filing for a U.S. initial public offering that
it expects the results of the CFIUS review before its registration statement becomes effective.
Josh Beckerman, “Fosun Group Insurance Unit Ironshore Inc. Files for IPO in U.S.,” Wall Street
Journal, July 22, 2016; Fosun, “Fosun’s Statement,” June 4, 2016. www.fosun.com/language/
en/p/8473.html.