US downgraded to ‘medium risk’ for China investment as relations turn sour amid ‘higher uncertainties’
- The world’s top economy dropped nine places from last year to 27th on the list of 114 countries assessed by the Chinese Academy of Social Sciences (CASS)
- Luxembourg is ranked as the best place for Chinese investment, followed by Germany, Australia and Sweden
The United States has been downgraded to a “medium risk” destination for Chinese investment with “higher uncertainties” due to the heightened bilateral disputes in trade, technology, finance, Hong Kong, and Xinjiang, according to a Chinese governmental think tank.
The world’s top economy dropped nine places from last year to 27th on the list of 114 countries assessed by the Institute of World Economy and Politics of the Chinese Academy of Social Sciences (CASS).
In terms of relations with China, the US dropped to a ranking of 103rd, lower than Botswana but better than Brazil and Mexico.
“It has become increasingly difficult to invest in the United States. Many hi-tech, financial and infrastructure projects were halted by the Committee on Foreign investment in the United States in the name of national security,” said Wang Bijun, a co-author of the research, on Monday. “Despite the phase one trade deal, it remains tense in investment.”
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According to the list updated annually by CASS, which is used as a reference point for Chinese investors, Luxembourg is ranked as the best place for Chinese investment, followed by Germany, Australia and Sweden.
The downgrading of the US by CASS comes as the two nations are being further decoupled with rows of the origin of coronavirus and technology raising potential for a new cold war.
China retaliated on Monday by announcing visa restrictions on US officials who “behave egregiously” in relation to Hong Kong affairs.
“China’s international environment is obviously deteriorating,” said Zhang Ming, who led the CASS research project. “The US bill could make it much harder for Chinese companies’ global investments.”
Canada, who has been at loggerheads with China over the detention of Huawei chief financial officer Meng Wanzhou in Vancouver and the detention of alleged spies Michael Kovrig and Michael Spavor by Beijing, dropped 10 places to 17th on the CASS list.
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China holds over US$2 trillion of outbound investment stock, a vast majority of which is located in developed countries and denominated in US dollars.
In the first five months of 2020, Chinese enterprises invested US$42.2 billion overseas, down 1.6 per cent, from the same period a year earlier, according to data from the Ministry of Commerce.
Investment in countries that have signed up to the belt and road plan, however, rose 16 per cent from a year earlier to US$6.5 billion during the period, or 15.5 per cent of the overall total.
But according to the CASS report, countries that are part of the belt and road strategy to grow global trade accounted for most of the 27 high-risk destinations, with Venezuela and Sudan, which attracted US$3.5 billion and US$1.3 billion of Chinese investment in 2018, ranked at the bottom.
“Although investment risk of new emerging markets remains relatively higher, they remain the most potential destinations of Chinese investment in the future,” the research report said.