Chinese investment in the U.S. plunged nearly 90 percent during President Trump’s first two years in office as the world’s two largest economies have waged an aggressive trade war.
According to figures from the data research firm Rhodium Group, investment from China hit an all-time high of $46.5 billion in 2016. The following year that amount dropped to $29.7 billion before plummeting to a nine-year low of $5.4 billion in 2018. During that two-year period, investment declined 88 percent.
{mosads}Trump has imposed tariffs on $250 billion worth of Chinese imports as a way to exert pressure on the world’s second-largest economy to change some of its business practices. China has been accused of unfair trade practices such as currency manipulation and intellectual property theft.
China responded by imposing its own tariffs on U.S. products, hitting the agricultural sector particularly hard. But the country has not been able to retaliate on the same scale since the U.S. buys significantly more goods from China.
The drop in Chinese investment could be a form of non-tariff retaliation against the U.S.
“China’s domestic crackdown on leveraged outbound investors has dramatically changed the landscape of activity in the US,” the Rhodium Group wrote in a report.
But some of the decline stemmed from increased U.S. scrutiny, according to Rhodium.
“We estimate that Chinese investors abandoned deals worth more than $2.5 billion in the US in 2018 due to unresolved CFIUS concerns,” the group wrote in a report, referring to the Committee on Foreign Investment in the United States, which regulates foreign investment.
The recent drop in Chinese investment marks a significant turnaround.
Before 2010, China’s investment in the U.S. was minimal. It remained well under $1 billion until after the Great Recession in 2009, when it shot up to $4.6 billion in 2010. Over the following years, it grew steadily until its 2016 peak.
After Trump took office, the number of deals and overall level of investment began to decline.
The U.S. and China last month agreed to restart negotiations after previous talks derailed in the face of new tariffs.