Chinese investment in America fell 90% in last 4 years

Chinese investment fell from $46.5 billion in 2016 to $5 billion in 2019

According to the popular believe and conspiracy theories the Chinese investment is on the rise in US and Chinese companies are buying the crisis ridden American companies. There are many conspiracy theories circling around that China is taking advantage of the coronavirus crisis in America and buying US companies and shares.  But the reality is completely different.

The matter of fact is that Chinese investment plummeting by nearly 90 percent since President Trump took office. Chinese direct investment in US continues to fall since President Trump took office in 2016. Chinese investment reached to the peak of $46.5 billion in 2016 during the Obama presidency. It has fell to just $5 billion in 2019 because of intensified trade war between the two largest economies in the world.

A new analysis published by the US-China Investment Project showed that Chinese investment in the US dropped to $5bn in 2019 from a peak of $46 billion in 2016, a slight decrease from a year earlier and the lowest level since the global financial crisis 10 years ago.

The escalating tariff war, while it gets the attention, has masked a sharp decline not in U.S.- China trade (which, according to U.S. Census Bureau data, has remained relatively static) but in Chinese investment in the United States.

The experts attributed the investment slowdown to Chinese restrictions on outbound capital, more regulatory oversight in the US, slower Chinese economic growth, and rising tensions between the two countries.

What has not been static is the level of Chinese investment in the United States. Between 2000 and 2018, according to data from the Rhodium Group, Chinese companies and individuals poured about $140 billion into the United States, with the bulk of that coming between 2011 and 2018 and with 2016 the peak year at about $46.5 billion.

The falloff, which is being felt broadly across the economy, stems from tougher regulatory scrutiny in the United States and a less hospitable climate toward Chinese investment, as well as Beijing’s tightened limits on foreign spending. It is affecting a range of industries including Silicon Valley start-ups, the Manhattan real estate market and state governments that spent years wooing Chinese investment, underscoring how the world’s two largest economies are beginning to decouple after years of increasing integration.

One analyst sums up the relations between the two countries in these words, “the fact that the foreign direct investment has fallen so sharply is symbolic of how badly the economic relationship between the United States and China has deteriorated. The U.S. doesn’t trust the Chinese, and China doesn’t trust the U.S.”

According to New York Times,   for years, Chinese investment into the United States had been accelerating, with money pouring into autos, tech, energy and agriculture and fueling new jobs in Michigan, South Carolina, Missouri, Texas and other states. As China’s economy boomed, state and local governments along with American companies looked to snap up some of those Chinese funds.

 That does not include Chinese purchases of U.S. real estate; according to the National Association of Realtors, the Chinese have been the largest foreign buyers of residential U.S. real estate, snapping up an average of nearly $30 billion annually from 2015 to 2018, mostly in Florida, Texas, California and New York. And, of course, China has also been the largest holder of U.S. government debt, having surpassed Japan and currently holding over $1 trillion of government bonds.

U.S. has supported China’s global integration with the expectation that as China benefited from the international economic system, including WTO membership, it would become a responsible stakeholder—where China would work with the United States “to sustain the international system that has enabled its success.

However, this U.S. view of China has progressively evolved into seeing China less as a partner and more as a competitor, culminating in the positions taken by the Trump administration. The trade and investment front is where some of the most dramatic shifts in U.S. policy towards China have manifested.

For instance, the U.S. 2017 National Security Strategy states that “China and Russia challenge American power, influence, and interests, attempting to erode American security and prosperity. They are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.”

 The same National Security Strategy called for the U.S. to rethink the policies over the past two decades, “policies based on the assumption that engagement with rivals and their inclusion in international institutions and global commerce would turn them into benign actors and trustworthy partners. For the most part, this premise turned out to be false.”

Contrary to popular believe Investment into China from the United States more than doubled in January, with the hi-tech industry witnessing the most significant increase. Investment from the United States into China has increased by 124.6 per cent.

China’s hi-tech industry saw significant growth, with the use of foreign capital surging 40.9 per cent year-on-year, the ministry said. Information services, research and development, design services, and scientific and technological achievements transformation services increased by 168.6 per cent, 35.8 per cent and 62.9 per cent respectively.

                                                                       Khalid Bhatti