Chinese investment in the US is slumping

According to media repots, “Chinese investment in the US could grind to a halt”. Chinese investment in the US is slowing because Chinese outbound investment (ODI) is slowing in general, due to a slowing economy. The Economist Intelligence Unit reported that after having peaked in 2016, overall China outbound investment was down 40%, year-on-year, in 2017. The American Enterprise Institute reported that although Chinese investment in the US had dropped 55% in 2017, it was still the second highest year of received Chinese ODI ever recorded. The US slipped only one notch, behind Singapore, becoming the second largest recipient of Chinese ODI.

The MSN article goes on to say, “Some 2.6 million U.S. jobs rely on the U.S.-China trade relationship.” And while this may be true, trade and investment are nearly unrelated. Reducing investment does not necessarily reduce trade. As MSN reports, according to recent research from Oxford Economics, “About 43,000 (jobs) are tied to China’s direct investment in the U.S.” While this is true, existing investments and jobs should not be effected by a slowdown of future investment.

Next, the article blames Trump for halting some Chinese deals in the US: “President Donald Trump has made it clear that any financial deals that could be linked to China are off the table.” However, Trump has not ceased all Chinese investment in the US, only investment that his administration has determined endangers national security, such as China taking large stakes in financial institutions or buying defense related technology.

An example of a deal which the president stopped, by way of presidential order, was the $580 million acquisition of Massachusetts-based Xcerra, a semiconductor testing company, by Sino IC Fund, a Chinese state-backed fund. Another sensitive technology is lidar, a laser pulse navigating system which is essential for self-driving vehicles. In 2016, Chinese internet giant Baidu acquired a sizeable chunk of American lidar specialist Velodyne. This deal has raised eyebrows in Washington, however, because lidar technology also has military applications, such as for the operation of drones.Many of the Chinese companies investing in US technology or financial sector firms are state owned enterprises (SOE) or firms which have close ties to the government. And even those investments made by nominally private enterprises (POE) may have been carried out at the request of the government, as part of a larger strategic investment plan.[10] Consequently, Rep. Robert Pittenger (Republican, North Carolina) is currently leading a team which is modernizing the Committee on Foreign Investment in the United States (CFIUS). As the Congressional Research Service explains, “CFIUS is an interagency body comprised of nine Cabinet members, two ex officio members, and other members as appointed by the President, that assists the President in overseeing the national security aspects of foreign direct investment in the U.S. economy.” In US history, CFIUS has only recommended that four deals be stopped, and in all four instances, the president has utilized a presidential order to cancel those deals. Rep. Pittenger said, an overhaul of CFIUS is needed to counter China’s “well-coordinated, government-driven effort to exploit our laws to acquire military-applicable technologies used to modernize their army and intelligence agencies”.

Apart from issues of national defense, Trump has also called for reciprocal market access. Chinese companies have taken large stakes in US investment banks, whereas the reverse would be prohibited under Chinese law. And, Chinese state owned firms or state-invested firms can make acquisitions in the US, something that would be unthinkable in China. One of the reasons for the US trade deficit with China is that China prohibits US firms from accessing certain sectors of the Chinese economy, but the US does not limit access by sector for Chinese firms. In China, whole sectors are closed to foreign investment, whereas in the US deals are evaluated on a case by case basis.

This means that even in sensitive sectors, the US may approve a Chinese deal as long as that deal was deemed to pose no threat to national security.

 Foreign Policy

 

Chinese investment in the US is slumping

According to media repots, Chinese investment in the US could grind to a halt. Chinese investment in the US is slowing because Chinese outbound investment (ODI) is slowing in general, due to a slowing economy. The Economist Intelligence Unit reported that after having peaked in 2016, overall China outbound investment was down 40%, year-on-year, in 2017. The American Enterprise Institute reported that although Chinese investment in the US had dropped 55% in 2017, it was still the second highest year of received Chinese ODI ever recorded. The US slipped only one notch, behind Singapore, becoming the second largest recipient of Chinese ODI. The MSN article goes on to say, Some 2.6 million U.S. jobs rely on the U.S.-China trade relationship. And while this may be true, trade and investment are nearly unrelated. Reducing investment does not necessarily reduce trade. As MSN reports, according to recent research from Oxford Economics, About 43,000 (jobs) are tied to Chinas direct investment in the U.S. While this is true, existing investments and jobs should not be effected by a slowdown of future investment. Next, the article blames Trump for halting some Chinese deals in the US: President Donald Trump has made it clear that any financial deals that could be linked to China are off the table. However, Trump has not ceased all Chinese investment in the US, only investment that his administration has determined endangers national security, such as China taking large stakes in financial institutions or buying defense related technology. An example of a deal which the president stopped, by way of presidential order, was the $580 million acquisition of Massachusetts-based Xcerra, a semiconductor testing company, by Sino IC Fund, a Chinese state-backed fund. Another sensitive technology is lidar, a laser pulse navigating system which is essential for self-driving vehicles. In 2016, Chinese internet giant Baidu acquired a sizeable chunk of American lidar specialist Velodyne. This deal has raised eyebrows in Washington, however, because lidar technology also has military applications, such as for the operation of drones.Many of the Chinese companies investing in US technology or financial sector firms are state owned enterprises (SOE) or firms which have close ties to the government. And even those investments made by nominally private enterprises (POE) may have been carried out at the request of the government, as part of a larger strategic investment plan.[10] Consequently, Rep. Robert Pittenger (Republican, North Carolina) is currently leading a team which is modernizing the Committee on Foreign Investment in the United States (CFIUS). As the Congressional Research Service explains, CFIUS is an interagency body comprised of nine Cabinet members, two ex officio members, and other members as appointed by the President, that assists the President in overseeing the national security aspects of foreign direct investment in the U.S. economy. In US history, CFIUS has only recommended that four deals be stopped, and in all four instances, the president has utilized a presidential order to cancel those deals. Rep. Pittenger said, an overhaul of CFIUS is needed to counter Chinas well-coordinated, government-driven effort to exploit our laws to acquire military-applicable technologies used to modernize their army and intelligence agencies. Apart from issues of national defense, Trump has also called for reciprocal market access. Chinese companies have taken large stakes in US investment banks, whereas the reverse would be prohibited under Chinese law. And, Chinese state owned firms or state-invested firms can make acquisitions in the US, something that would be unthinkable in China. One of the reasons for the US trade deficit with China is that China prohibits US firms from accessing certain sectors of the Chinese economy, but the US does not limit access by sector for Chinese firms. In China, whole sectors are closed to foreign investment, whereas in the US deals are evaluated on a case by case basis. This means that even in sensitive sectors, the US may approve a Chinese deal as long as that deal was deemed to pose no threat to national security. Foreign Policy