Investment flows between China and the United States fell to their lowest level in nearly a decade during the first half of the year, as the coronavirus pandemic and political tensions cast a shadow over cross-border activity .
Capital flows between the two countries amounted to $ 10.9 billion in the first six months of 2020, lower than any period since 2011, according to a report by consultancy firm Rhodium Group and the National Committee on United States-China Relations, a non-governmental organization.
US-China relations have fallen to their lowest point in decades after the coronavirus pandemic, which exacerbated friction on trade and raised fears of a cooling of the ‘cold war’ between the world’s two largest economies .
The report, which tracked foreign direct investment and two-way venture capital investment, also warned of pressures to “unravel existing investments” in the United States after Donald Trump ordered the sale of the US operations of TikTok, the video application owned by the Chinese company. ByteDance.
“Currently, we are moving towards decoupling,” said Stephen Orlins, chairman of the National Committee on US-China Relations. He added that relations were worse than any time he had known since the 1970s, including after the Tiananmen Square massacre in 1989.
“This is human rights, this is economic reform, this is the South China Sea, this is Hong Kong’s national security law, this is Taiwan. . . [there’s] a long, long list of issues where tensions are very high, ”he said.
The report found that cross-border investment would have been significantly lower had it not been for a single deal in the United States: Chinese tech company Tencent bought a $ 3.4 billion stake in Universal Music Group.
“The number of completed investment transactions has remained low as a broader and more restrictive set of US policies have been applied, particularly in the tech sector,” the report said.
The indicator of combined investment between countries peaked in 2017 at $ 37 billion and has mainly declined since then.
Jean-Marc F Blanchard, executive director of the Mr and Mrs SH Wong Center for the Study of Multinational Corporations, a California-based think tank, said the long-term decline in Chinese FDI in the United States was due to weak of Chinese Conglomerates which had developed abroad.
“There has been a sharp increase in Chinese investment in the United States during the 2015-2017 period and I think everyone expected that to be the case. . . the new standard, when it was extremely biased in relation to what had happened, ”he said.
In China, where investment in the United States fell 31 percent year-over-year in the first half of the year, Orlins suggested the drop “was almost entirely linked to the pandemic.”
A survey released last week by the US Chamber of Commerce in Shanghai found that less than 4% of those surveyed were relocating their production capacity to the United States.
In recent weeks, large U.S. corporations have stepped up their efforts to play a larger role in the rapid liberalization of China’s financial services sector following government reforms.
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