Chinese foreign direct investment in the US is unlikely to rebound meaningfully even if Washington and Beijing restart high-level negotiations that are expected to place such investments on the agenda, according to a new report by Rhodium Group.
Investment from China has remained subdued for five years since collapsing after a surge in 2016 and 2017, the report showed. Total Chinese FDI in the US over the past decade reached about $190 billion — far below the $1 trillion figure floated in last year’s high-level discussions in Madrid — highlighting the gap between political rhetoric and economic reality, analysts at the research group noted.
Washington and Beijing are both moving to tighten control over cross-border investment in critical sectors as part of an effort to protect strategic technologies and reduce mutual dependencies. Their competition to dominate artificial intelligence has mostly sealed off from each other the hundreds of billions of dollars in spending by the industry.
Against that backdrop, promises of large investments have given way to a more constrained reality, where structural tensions are reshaping capital flows between the world’s two largest economies. That dynamic is expected to prevail even after the meeting scheduled next month between Chinese leader Xi Jinping and President Donald Trump.
“Washington’s national and economic security concerns will continue to limit Chinese participation in core areas of the US economy,” Rhodium analysts including Thilo Hanemann wrote. “More importantly, Chinese regulators now treat outbound investment in greenfield manufacturing projects as a potential channel for technology leakage, industrial erosion and job losses.”
A trade deal between the US and China may help revive Chinese FDI but is unlikely to trigger a new investment boom, according to the report.
“Bilateral negotiations could provide some guardrails, but it would not address the core reasons for the slowdown, which are deeply embedded in US-China strategic competition and distrust,” the researchers said.
In the final weeks before the summit between Xi and Trump, both nations are seeking to armor their supply chains, lock down critical intellectual property and build leverage.
Beijing on Monday sought to unwind Meta Platforms Inc.’s $2 billion purchase of AI startup Manus — its most dramatic move yet to keep cutting-edge technology inside its borders. China also announced new regulations this month to ensure its manufacturing dominance, targeting foreign companies for shifting supply chains out of the country or complying with US export controls.
For its part, the Trump administration has ramped up scrutiny of Beijing’s ties with Tehran in the past week, sanctioning one of China’s largest private refiners and warning Chinese banks they could face secondary sanctions if the Asian nation keeps propping up the Iran’s revenues.
–With assistance from Colum Murphy.
Disclaimer: This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.