In the '80s and '90s, cash-rich Japanese firms acquired and invested in a cornucopia of businesses and other U.S. assets. Now, Chinese companies are becoming increasingly active in buying, merging with and doing joint ventures with smaller U.S companies, and experts say it looks like the beginning of another wave of Pacific Rim investment.
"China is definitely becoming a source of capital for U.S. companies," says Michael D. Lord, associate professor of management and director of the Flow Institute for International Studies at Wake Forest University in Winston-Salem, North Carolina. Lord says Chinese investment could parallel--and exceed--the Japanese buying binge.
Chinese investors are usually after technology, brands and access to U.S markets, says Usha Haley, professor of management and international business at the University of New Haven in Deep River, Connecticut. "Nobody can beat the Chinese on labor costs," Haley says, "so they're looking for companies that have technology."
Chinese investment in U.S. firms has risen recently as Beijing relaxed regulations on such deals, says Haley. Like Lord, she expects the trend to continue and intensify. But she cautions that Chinese investments may not always be a boon. Compared to Japanese and Korean firms, Chinese businesses place less stress on service, expect profits more quickly and like to attack markets on a broad front rather than using wedge-style tactics, she says.
Lord expects Chinese VCs to eventually set up formal processes for tapping Chinese capital. For now, he urges entrepreneurs to consider visiting the country and to simply keep in mind that the world's biggest country could turn out to be a big source of capital as well. "They have a lot of cash from all [the Chinese imports] we're buying over here," he says. "So it's definitely going to grow."