Coming amid the escalating trade war between the US and China, many were quick to blame the collapse in Chinese investments in the US on tensions surrounding protectionism. And indeed, according to research firm Rhodium Group, China’s direct investments in the U.S. plunged in the first half of 2018 as Chinese companies completed acquisitions and greenfield investments worth only $1.8 billion, a 92% drop over the past year, and the lowest level in seven years.
The reality, however, is that this has little to do with the Chinese trade spat, and everything to do with China's crackdown on outbound M&A and conglomerate "investments" which as we said back in 2015, were just a thinly veiled scheme to cover capital outflows.
Rhodium confirms as much:
The rapid decline in Chinese FDI in the U.S. was driven by a “double policy punch” -- Beijing cracking down on rapid outbound investment and the U.S. government increasing scrutiny on Chinese acquisitions through the Committee on Foreign Investment as well as taking a more confrontational stance toward economic engagement with China in general.
The investment tracker is based on collection and aggregation of data on individual transactions, including acquisitions, greenfield projects, and expansions.
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