China's Investment in the U.S. Is Collapsing as Trade War Flares

(Bloomberg) -- China’s direct investment in the U.S. slumped in the first half of this year, amid deteriorating economic relations between the two nations, according to research firm Rhodium Group LLC.

In the first half of this year, Chinese companies completed acquisitions and greenfield investments worth $1.8 billion, representing a drop of more than 90 percent from the same period in 2017 and the lowest level in seven years, according to Thilo Hanemann, a senior policy fellow at the New York-based firm.

As the Trump administration faces off with Beijing over a trade dispute that’s partly focused on alleged abuses of U.S. intellectual property, lawmakers and the White House are planning fresh curbs on Chinese investment. On Wednesday, a White House report claimed that China’s spectacular economic growth “has been achieved in significant part through aggressive acts, policies and practices that fall outside of global norms and rules.”

China’s domestic campaign to reduce financial risks and contain capital outflows since 2016 also contributed to the decline in total outbound investment last year, with the official data registering a rebound this year.

Rhodium’s investment tracker is based on collection and aggregation of data on individual transactions, including acquisitions, greenfield projects, and expansions. 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, Hanemann wrote.

The first-half slump follows a 35 percent fall for all of last year, and the net investment flow is negative if the sale of assets is taken into account -- Chinese investors sold $9.6 billion of US assets in the first five months of 2018, mostly driven by deleveraging pressures from Beijing, according to Rhodium. Former high-profile acquirers such as HNA Group Co., Anbang Insurance Group Co. and Dalian Wanda Group Co. have started to put their assets up for sale.

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