UK businesses are shunning merger and acquisition (M&A) deals in China in the first quarter, according to the latest analysis by Grant Thornton Corporate Finance in Birmingham.
The lack of activity has seen the UK drop out of the top ten acquirer nations for the first time since 2000.
During the quarter UK businesses completed just eight deals in China, worth £25 million. The US completed 39 deals, worth almost £350 million.
Singapore announced 29 deals worth £156 million, and rounding out the top ten were nations as diverse as South Korea, Switzerland and Canada.
In 2007, the US announced £2.39 billion worth of deals in China, compared with just £213 million by UK firms. Foreign firms announced £11.39 billion worth of M&A deals last year.
Mark Audin, corporate finance director at Grant Thornton in Birmingham, said while the US remained consistently active, UK businesses were often placing China in the "too hard" category.
"The world is focused on China and the opportunities it offers. While the Chinese economy is remarkably more developed than a decade ago, it is still in almost every sense a developing nation, and therefore has huge growth potential for UK businesses willing to invest time, money and energy," he said.
But while the UK's activity has fallen, the announced purchase of a £7.18 billion share in Rio Tinto by a Chinese-owned consortium means China was the most active foreign buyer in the UK last quarter.
Mr Audin said there was also a range of direct and indirect investment in the UK from China's Sovereign Wealth Funds (SWFs), with the state active in seeking out a diverse national portfolio.
"China has built huge surpluses during its economic boom, and also through its currency controls. For the right organisations, this surplus, in the form of SWF investment, could offer a liquidity injection that may be harder to obtain through traditional lenders in the current credit climate," he said.
Chinese businesses have been acquiring more offshore interests than ever before due to the surplus of cash at their disposal. The amount of announced foreign acquisitions by Chinese companies in the first quarter totalled £11.91 billion, almost equalling the total deal value of 2007, and already surpassing the total deal value between 1998 and 2004.
Mr Audin said the activity showed no signs of abating, and while the West was struggling with the credit crunch, China would be in a strong position to pick up the bargain companies that inevitably emerge in times of a downturn.
"China is on a shopping spree fuelled in large part by high levels of consumer spending in the West," he said.
He predicted that Chinese SWFs or private equity groups backed by Chinese equity would acquire some big name brands in Britain during the final part of the decade, particularly those in minerals and fossil fuels.