US Outbound Investment Shifting From China to Japan, South Korea, Law Firm Says

Eighteen U.S. outbound investment deals in China were announced through the first three quarters of 2023, down 10% from the same period last year and about 75% compared with 2021, White & Case said in a November client alert. The firm said global investment flows are increasingly rerouting to Southeast Asian countries instead of China, such as Vietnam, Indonesia and Thailand, while U.S. investors are specifically choosing to target South Korea and Japan. Through the first three quarters of this year, U.S. dealmakers have targeted 16 South Korean and 23 Japanese assets, the first time since 2016 that the number of U.S. investments in Japan has surpassed those in China, the firm said.

White & Case specifically pointed to Minnesota-based healthcare technology company Medtronic’s acquisition of Seoul-based EOFlow, the largest announced U.S. investment in South Korea this year at $738 million. The firm said Medtronic’s previous three transactions in the region over the past decade all involved Chinese assets, “meaning its pivot to Korea could prove illustrative of a sea change in US outbound [mergers and acquisitions] into the region.”

The decline in outbound investment in China comes as the Treasury Department drafts regulations to prohibit or require notifications for investments in certain Chinese technology sectors (see 2308090066, 2310050035 and 2309220050).