Chinese Investments In The US Plunge By 92%

Coming amid the escalating trade war between the US and China, many were quick to blame the collapse in Chinese investments in the US on tensions surrounding protectionism. And indeed, according to research firm Rhodium Group, China’s direct investments in the U.S. plunged in the first half of 2018 as Chinese companies completed acquisitions and greenfield investments worth only $1.8 billion, a 92% drop over the past year, and the lowest level in seven years.

The reality, however, is that this has little to do with the Chinese trade spat, and everything to do with China's crackdown on outbound M&A and conglomerate "investments" which as we said back in 2015, were just a thinly veiled scheme to cover capital outflows.

Rhodium confirms as much:

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.

The investment tracker is based on collection and aggregation of data on individual transactions, including acquisitions, greenfield projects, and expansions.

Whatever the reason behind the sharp drop, however, it doesn't change the fact that there has been a recent collapse in recycled Chinese capital back into the US. And, while it may not have caused it, Trump's recent change in trade policy will certainly make future Chinese direct investment far more problematic. As Bloomberg notes, "lawmakers and the White House are planning fresh curbs on Chinese investment." Furthermore, as we reported earlier, a just released 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."

As Thilo Hanemann, a Rhodium direct said, "the more confrontational approach of the Trump administration toward economic relations with China has cast some doubt, in these companies' minds, about their position here."

The first-half slump follows a 35% drop in 2017, and if the sale of assets is taken into account - as Chinese investors sold $9.6 billion of US assets in the first five months of 2018, mostly driven by deleveraging pressures from Beijing - the net investment flow is negative. And with former high-profile acquirers such as HNA Group Co., Anbang Insurance Group Co. and Dalian Wanda Group Co. putting their assets up for sale, it will be a long time before China's serves as a source of direct capital in the US again.

Comments

uhland62 JimmyJones Thu, 06/21/2018 - 00:07 Permalink

There is a lot of negative talk about China and Russia. So why would Chinese and Russians queue up to invest in the 'enemy country'. Should there be more serious hostilities the risk of having your assets frozen or confiscated as punishment is real.

Decoupling from the US is a prudent policy. Better safe than sorry. 

In reply to by JimmyJones

Yen Cross Wed, 06/20/2018 - 22:49 Permalink

  So, in some demented way, that's good for the $560bb narrows the gap Sino/US trade deficit. ha

  China doesn't need to sell treasuries, they just stop stealing from us, and the yuan strengthens.

Seasmoke Wed, 06/20/2018 - 23:05 Permalink

No one is investing in anything US and yet the markets and USD keep going higher. 

Everyone is buying and taking delivery of physical Gold and the price keeps going lower. 

Yen Cross Seasmoke Wed, 06/20/2018 - 23:34 Permalink

  Mario Draghi is scared shitless, Seasmoke.

  The European Union is about to rattle itself apart.

  Rates are still negative to zero bound, massive central bank debt, massive peripheral debt,  massive issues with NPL in European sovereigns, ect...

 The $usd isn't strong, the Euro is just a worthless POS. Look at usd/chf.

 locked in a 40-50 pip range for a week. Investors don't know where to run.

  Yen likes to to INVERSE trade> Shorting Fangs, Corporate bonds, RUTsmall caps commercial and residential R/E, and some other goodies.

  IT'S all about "Margin Management".

 

In reply to by Seasmoke

dubsea Wed, 06/20/2018 - 23:19 Permalink

Make it a hundo.... we're built on a democracy...hence.  ..wait.. wait....for it...free trade...and they ain't being free .... equal ...means... equal ... deficits... Are far from it..

SnottyBubbles Wed, 06/20/2018 - 23:37 Permalink

China/Russia sells stocks? Market absorbs it without notice.

Sell China's remaining $1.2 T-bills? Russia/China just dumped $1T. Interest rate went down providing $ liquidity to buy stocks and feed a short $ global market ... better than QE.

 

 

 

PitBullsRule Thu, 06/21/2018 - 00:01 Permalink

Who are you going to sell Sears to now? You thought you were smart, until you realized you need to sell GE to some sucker and nobody has any money except the Chinks. Americans have turned into a bunch of soft hicks, we used to be strong hicks, stupid but stubborn and stout. Now were just stupid and lazy. Not a good combination.

How ironic that you could give those Chinks little squares of paper with green drawings of dead presidents on it, in exchange for manufactured products, and you fucked that deal up. One would expect the sucker getting screwed out of the manufactured goods in return for the paper squares to fuck that up, but you guys fucked it up. Thats a new kind of stupid. I guess that will be Trump's legacy.

Yen Cross Thu, 06/21/2018 - 00:09 Permalink

  Tyler posted an article earlier. I'll look it up, after I have a meal.

 Basically, Tyler was reiterating confirming, the significance of this article.

  How do these banksters[dumb money traders] get out of their over 100.00% multiple levered trades?

   In some cases, I'm sure 120-130% levered. The margin costs account maintenance with higher borrowing costs, are going to take those people apart.

  What's extremely troubling, is that these individuals don't understand how to read charts and price action.

Golden Showers Thu, 06/21/2018 - 02:34 Permalink

What does China do for the USA? China buys Treasury Bonds. China sells cheap shit.

https://www.made-in-china.com/products-search/hot-china-products/Rebar…

Rebar.

Look: If all that Chinese shit for sale at walmart trippled in price tomorrow and a whole lot of people couldn't afford to keep up their (ahem, ignorant ugly useless plastic shit) lifestyle, not only would it not be China's problem; it would be due solely to the fact that all the shuttered USA businesses who couldn't compete and closed are gone for good. Supply chains: gone. Employers: gone. Employees: gone.

It's all gone. Quid pro Quo: We China: we buy US debt... We sell you cheap shit. China was way ahead on this. In my wildest dreams if Walmart prices went parabolic, then entire communities based on walmart are fucked. People need walmart like they need oxygen. Decades of walmart has fucked Americans up.

A real trade war is kicking someone where it counts: the money. China stops buying bonds, starts selling bonds, and what the fuck about Chinese exports of garbage? This always has been a US economic problem and not a Chinese problem. Call me crazy, but what is the most successful profitable US based business in China? http://jiesworld.com/international_corporations_in_china.htm

"Companies such as Avon, GE, and AT&T for example, have been in China and manufacturing products for 20 to 30 years. Most American consumers simply had no idea. Previously their source was Japan."

What you need to know is that there is no trade war. Until the shit hits the fan and all our Yankees get kicked the fuck out of China and that won't happen, this is a non event. What is a "trade war"? If I don't want to buy your shit, I don't. If I don't want to sell you my shit, I don't. There is no such thing as a "trade war". Trade war. Trade.

Share war? Buy and sell stuff war? Ought to land right on the desk of Customs. Don't let that fucking ship into port. That's a trade war. What do you think is gonna happen? Chinks illegally entering the country from Mexico to sell you a calculator for 99 cent? Fuck no. All those companies on that list such as Avon, GE... are selling you out.

If the United States had an economy and insustry that was worth jack shit we would not need to "trade war" with any fucking country. Period.

You can't MAGA with a trade war. Open a fucking steel mill.

Money_for_Nothing Thu, 06/21/2018 - 07:26 Permalink

Who wants direct investment? Answer: Shithole countries. China was/is investing in the US to either invade or loot. China started buying US Politicians big-time starting with Bill Clinton. Hard to tell who bought the biggest piece of Obama, China or Saudi Arabia. Russia owned all of Hillary that wasn't already sold through the Clinton Foundation.