Chinese firms favor greenfield investment in US, survey finds

Greenfield investment is the most common initial structure for Chinese investors in the US, according to a report released Wednesday.

The report – 2018 Annual Business Survey Report on Chinese Enterprises in the US – was released by the China General Chamber of Commerce-USA (CGCC).

A greenfield investment is a type of foreign direct investment where a parent company builds its operations in a foreign country from the ground up.

Nearly 40 percent of the Chinese companies surveyed established their presence in the US with new business entities, and another 30 percent began operations through a representative office, according to the report.

Acquisition by direct purchase of an entire corporate entity or of an entity’s operating assets was used by only 28 percent of survey respondents to start their business in the US, according to the report.

The report said Chinese companies prefer the greenfield strategy largely because it offers optimal managerial control over the business during its earliest days. By establishing a new business entity, companies are also more likely to receive tax credits, infrastructure improvements, and other inducements from local governments in the US.

Nearly 60 percent of respondents said their staff expanded in 2017. The same percentage expect to increase their workforce in the next two years.

As the largest non-profit organization representing Chinese enterprises in the US, CGCC has 1,500 member companies. The organization’s Chinese member companies have collectively invested more than $120 billion and they employ more than 200,000 people in the US.