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Outlook on Foreign Direct Investment in 2016

February 22, 2016

Investment into the United States, notably from China, will remain strong in 2016 as international investors search for higher returns and market stability. That’s according to a survey released today in O’Melveny’s 2016 Foreign Direct Investment Report.

The report, which can be found here in English and 中文版请点击这里, comprises responses from strategic and financial investment executives—the majority of whom are headquartered in China—and provides a wealth of insights into foreign investors’ perceptions of the advantages and challenges of foreign direct investment in the US.

Nearly half of the investors surveyed viewed the United States as one of the world’s most attractive markets for investment, citing the potential for growth as its strongest attribute. Yet while 38 percent of respondents perceived the US’s regulatory regime as an attractive attribute, 48 percent viewed it as the greatest barrier to investment.

That seeming contradiction actually paints an accurate portrait of the US market, according to Steve Olson, Los Angeles O’Melveny partner and former Executive Director of SelectUSA, the US government program that facilitates foreign direct investment.

“The very attributes that make the United States the most attractive destination for investment in the world can also present challenges to investors,” Olson said. “We are the largest fully developed consumer market in the world, but a highly competitive market. We’re the most open economy in the world, but certain foreign investments will be reviewed for national security implications. We’re blessed with an effective and predictable legal system, but businesses in the US face a high rate of litigation.”

The report also depicts Chinese investors’ newfound desire to pursue higher returns through diversified investments. While 66 percent of respondents said they were targeting both publicly and privately held companies, these companies span a wide range of industries, led by healthcare and technology. The remaining respondents’ targets were evenly spread across real estate, land resources, infrastructure and alternative investments.

As Chinese investors, seeking to diversify amid a slowing domestic economy, send more investment capital into the US, the relationship between the two countries will undoubtedly become more complicated. The survey results reflect many of the nuances of that relationship, but also demonstrate Chinese investors’ sanguine perspective on American politics.