In the news: Outbound investment picks up in the US and GSK executives likely to be charged
November 07, 2013 | BY
clpstaff &clp articles &Outbound investment into the US reached record levels, boosted in part by the closing of Shuanghui's acquisition of Smithfield. GSK's executives under investigation are likely to be charged but the company may avoid penalties
China FDI reaches new heights in the US
Rhodium Group released their Chinese FDI in the United States: Q3 2013 Update last week. Shuanghui International's $7.1 billion acquisition of Smithfield marked the largest Chinese acquisition in the US to date. In addition, Chinese real estate developers tapped the US property market with Fosun's $725 million purchase of Chase Manhattan Plaza and Shanghai Greenland's investment in New York. The Update notes that in the first nine months of this year, Chinese firms spent a record $12.2 billion on 55 projects and acquisitions in the US. In addition, Smithfield's takeover has catapulted the amount of US workers that receive paychecks from Chinese-owned companies from 33,000 to more than 70,000.
Outbound investment is definitely picking up in the US. Shuanghui's acquisition – the largest to date –may pave the way for similar transactions. The increase in property investments is expected as the country battles with its own real estate crisis. The Update shows us that Chinese outbound investors are getting more sophisticated and are prepared to spend big. It also reveals that the US investment review system is working and that the country is also welcoming to Chinese investment. The rapid increase from 33,000 to 70,000 US workers receiving their salaries from Chinese-owned companies shows Chinese money is increasing its foothold in the US.
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GSK executives likely to be charged
Reuters ran a story on the low probability that GSK as a company would be charged as a result of the bribery allegations against some of its China executives. A charge against GSK could see the company face major fines and disruption to its China operations. Chinese police are accusing some executives of funneling Rmb3 billion ($492 million) to travel agents to facilitate bribes to doctors and officials to boost its drug sales. The article quoted an unnamed source close to the investigation as saying that the Ministry of Public Security had tried to find evidence tying GSK as a legal entity to the alleged wrongdoing, but it was unlikely authorities would be able to prove its involvement at a corporate level.
A charge against GSK would be a huge win for the authorities, but could send a harmful message to multinationals in China. Foreign companies are already feeling the enhanced crackdown on bribery and corruption from the authorities. GSK's senior management could also face charges if the authorities can prove that they had knowledge of the bribery. This case is a reminder to all companies that bribery will not be tolerated and that charges against companies and senior executives will happen sooner rather than later.
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