In 2017, Chinese investment in the United States declined, which is the result of a policy pursued in both Beijing and Washington. The decline comes after the record high levels of foreign direct investment in 2016 from China to the US, and it looks like this year’s decline will continue.
According to research firm Rhodium Group, in 2017, Chinese investments in the US reached $ 29 billion on completed deals, which is 35% less than a year ago.
However, this is only half of the volume of transactions that were announced in 2016. The value of new announced deals in 2017 decreased by 90% compared to the previous year and amounted to only $ 8.7 billion. With these indicators in 2017, it was fixed the smallest in six years the volume of announced Chinese foreign direct investment in the United States.
The main factor of decline, as noted by Rhodium, is the control that Beijing introduced at the beginning of last year with respect to outgoing investments. A strict ban prevented some of the country’s most active traders, including the giant in the Wanda real estate market and the HNA conglomerate.
Tracking monthly data on Chinese foreign direct investment in the US shows that investment fell right after Beijing issued its warning. According to Rhodium, in December 2016, China invested about $ 8 billion in US business. In January 2017, he invested slightly more than $ 2 billion.
However, Washington also played a role in the reduction of transactions. The Foreign Investment Committee in the United States, an interdepartmental government body that monitors potential threats to national security, has played its role in preventing several key investments that have been pending.
In September of this year, he canceled a planned $ 1.3 billion acquisition of Lattice Semiconductor by Canyon Bridge Capital Partners, based in California and linked to the Chinese government. Two months later, the Chinese aluminum producer Zhongwang canceled the payment of $ 2.1 billion for the purchase of aluminum producer Alleys in Cleveland, citing uncertainty about the approval of the CFIUS.
In general, Rhodium listed seven unsuccessful deals that would have resulted in “at least another $ 7 billion or $ 8 billion “of Chinese investment in the US, if they were approved.
This year is unlikely to expect a recovery in the flow of transactions. Despite the fact that Beijing has shown that the control over the capital will weaken slightly to realize its initiative “One belt – one way”, it is unlikely that such large transactions will be realized that would lead to an investment boom.
Meanwhile, Washington, it seems, intends to strengthen control over Chinese investments in local companies. Yesterday, the Senate committee considered all the pros and cons of the Foreign Investment Risk Review Modernization Act.
The law would increase the powers of the CFIUS by expanding the types of transactions with China, for which the agency can exercise control and then cancel, which is implicit, but is accomplished by an obvious goal.
