Chinese investment in US has plummeted 90pc as trade war drags on: NYT

NEW YORK: Chinese investment in the United States has nosedived by nearly 90 percent since President Donald Trump took office in 2017  as a result of the growing distrust between the world's two largest economies, The New York Times reported Sunday.

The falloff, which the newspaper said was being felt broadly across the US economy, stems from the Trump administration's tougher regulatory scrutiny and a less hospitable climate toward Chinese investment, as well Beijing’s tightened limits on foreign spending that is affecting a range of industries including Silicon Valley start-up  and the Manhattan real estate market.

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

"But Mr. Trump’s economic Cold War has helped reverse that trend," the Times said.

Chinese foreign direct investment in the United States fell to $5.4 billion in 2018 from a peak of $46.5 billion in 2016, a drop of 88 percent, according to data from Rhodium Group, an economic research firm. Preliminary figures through April of this year, which account for investments by mainland Chinese companies, suggested only a modest uptick from last year, with transactions valued at $2.8 billion.

“I certainly hear in conversations with investors a lot of concern about whether the U.S. market is still open,” Rod Hunter, a lawyer at Baker McKenzie who specializes in foreign investment reviews, was quoted as saying. “You have a potentially chilling effect for Chinese investors.”

Trump’s penchant for imposing punishing tariffs on Chinese goods and an increasingly powerful regulatory group that is heavily scrutinizing foreign investment, particularly involving Chinese investors, have also spooked businesses in both countries, the report said.

China, which has retaliated against American goods with its own tariffs, may also be turning off the investment spigot as punishment for Trump’s economic crackdown, it said.

Concerns about America’s receptiveness to Chinese investment have been aggravated by a flurry of transactions that collapsed under heavy scrutiny from the Committee on Foreign Investment in the United States, according to the Times. The group, which is headed by the Treasury Department, gained expanded powers in 2018 that allow it to block a broader array of transactions, including minority stakes and investments in sensitive technologies like telecommunications and computing.

Shortly after the New Year, China’s HNA Group took a $41 million loss on a glass and aluminum Manhattan high-rise after American regulators forced it to sell the property because of security concerns about its proximity to Trump Tower, only a few blocks away.

The investment chill could hurt the American real estate market particularly hard, the report said. A May report noted a “frenzy of disposal activity” among Chinese commercial real estate investors in the United States.

In March, the Chinese owners of a gay dating app known as Grindr were told by regulators to find a buyer for the company, it said. The Trump administration feared Beijing could use personal information as leverage over American officials.

Those interventions followed prominent cases earlier in Mr. Trump’s term, such as Broadcom’s quashed bid for Qualcomm and the sale of MoneyGram to a unit of the Chinese e-commerce giant Alibaba last year. An agreement involving Lattice Semiconductor and an investment firm with reported ties to the Chinese government was also rejected.