Trade escalation can further dampen Chinese investment outlook in US after falling to US$5 billion in 2018
- Chinese FDI to the US dropped 83 per cent last year to US$5 billion, report shows
- Investors facing tough scrutiny turned to VC deals; others pulled out of US
Chinese investors, finding the US business environment uninviting, are turning to venture capital to skirt heightened scrutiny, while some have pivoted to other parts of the world altogether.
Chinese foreign direct investment (FDI) into the US plummeted for the second straight year in 2018, tumbling 83 per cent to US$5 billion, according to a Wednesday report by the National Committee on US China Relations.
A year earlier, FDI amounted to US$29 billion, down from the peak of US$46 billion achieved in 2016.
The latest figure represented the lowest level of direct investment by China since 2011. In 2018, Chinese investors sold US$13 billion worth of US assets. Including those sales, direct investment in the US came to negative US$8 billion.
The outlook for direct investment from China to the US turned more bearish after prospects for an end to the current bilateral trade standoff dimmed. US President Donald Trump over the weekend announced a tariff hike to 25 per cent from the current 10 percent on US$200 billion of Chinese goods this Friday, citing a lack of progress. China has since pledged countermeasures.
”If [the escalation in tariffs] really happens, it will certainly further reduce Chinese businesses’ confidence in the US,” said Stephen Orlins, president of the committee, which runs the US China Investment Project together with Rhodium Group. “FDI numbers won’t turn around and it will accelerate businesses to move away from China.”