A continuing trend . . .
New analysis from the US-China Investment Project reveals that escalating bilateral frictions and the economic fallout from the COVID-19 pandemic in the first half of 2020 pushed China-U.S. bilateral foreign direct investment (FDI) flows to their lowest level since 2011. New flows of direct and venture capital investment between the countries, in both directions, totalled C$14 billion between January and June, according to the research initiative led by Rhodium Group and the National Committee on U.S.-China Relations. The decline continues a trend of the last three years, reversing a flurry of mergers and acquisitions by Chinese conglomerates in the U.S. and relatively higher activity by U.S. firms in China, that when combined, peaked at over C$45 billion in 2017.
Pandemic and politics to blame . . .
Dragging down investments are poor China-U.S. relations, the COVID-19 pandemic’s direct and indirect impacts exacerbating trade tensions, and fears of an enduring chill between the world’s two largest economies. The US-China Investment Project analysis also warns that “growing bilateral tensions are pressuring firms to unravel existing investments” in both China and the U.S. The report specifically notes President Donald Trump’s involvement in the sale of the U.S. operations of China-owned TikTok as one such example. More divestments may come: On Thursday, the Committee on Foreign Investment in the United States (CFIUS) sent letters to technology and video game companies involved with China’s Tencent to ask about their protocols for securely handling personal information.
Canada-China FDI also down . . .
China is also slowing investments around the world. Chinese companies announced only 217 international mergers and acquisitions between January and June, down from recent averages of over 500 every six months going back to 2016. Canada-China investment ties are also waning. According to data from the APF Canada Investment Monitor, China invested C$230 million in new FDI in Canada in the first half of 2020, down from a recent peak of C$8.4 billion in the latter half of 2018. Flows are also low in the other direction: Canada invested just C$280 million in China during the same period, down from a recent high of C$2.8 billion in the second half of 2018, just before the Meng Wanzhou spat.
- Asia Pacific Foundation of Canada: Investments drop one year into the Canada-China dispute – But there’s a catch
- Financial Times: China-US investment falls to lowest in almost a decade
- The US-China Investment Hub: Two-way street: 1H 2020 update