Chinese businesses are significantly reducing their investments in the United States as bilateral relations between the two nations deteriorate, and business conditions become more challenging, according to a report by the Financial Times citing data from the Rhodium Group think tank.
The report reveals that Chinese financial investments in America plummeted to just $2.5 billion in 2022, marking the lowest level over a decade and a significant drop from the record $48 billion in 2016. Not only is Chinese financial input declining, but the activity of Chinese companies already operating in the US is also shrinking, as the data indicates.
Experts attribute this decline to the increasingly challenging environment for Chinese investors in the US. Adam Smith, a partner at the law firm Gibson Dunn and a former US Treasury adviser, highlighted the shift, stating, “The environment in the US has become more challenging for Chinese investors.”
A recent US-based China General Chamber of Commerce survey revealed that over 80% of Chinese companies view the deteriorating bilateral relations and “unstable US policies towards foreign investment” as their most significant challenges.
Pin Ni, head of Wanxiang America, a Chinese car parts maker branch with over 30 years of presence in the US market, expressed the change in perception of Chinese businesses in the United States. He said, “We used to be a panda… Everybody liked us. But then, we became the skunk, and people fear getting close… People say, ‘Oh, as long as you carry the name, it looks like you’re Chinese. If you’re Chinese, then we’re concerned.”
US officials have increasingly labelled Beijing as Washington’s top economic rival, accusing Chinese firms of activities ranging from the theft of US intellectual property to espionage on American citizens. Both former President Donald Trump and his successor, Joe Biden, have adopted a tough stance on China, with actions such as imposing tariffs, blacklisting Chinese tech companies, and introducing export controls on semiconductors.
However, market experts caution that cutting ties with Chinese investors and foreign investors, in general, could harm the US economy. The overarching question is whether this trend will extend to other jurisdictions and whether the US wants to retreat from the global stage.
As tensions continue to affect business relationships, it remains to be seen whether the current trajectory of reduced Chinese investment in the US will be a long-term trend or whether diplomatic efforts can help improve conditions for investors in both countries.