Key Takeaways:
– The Chinese investments in the U.S. have significantly dropped since Donald Trump’s first term.
– This decreasing trend is expected to continue during Trump’s second term.
– Despite lowering deals in the U.S, Chinese companies have shifted focus to joint ventures or greenfield investments.
– Individual U.S. states have grown increasingly wary of Chinese investments.
– Trump’s policy unpredictability adds to the uncertainties surrounding Chinese investments.
Chinese Investments in the U.S. Dwindling
The flow of Chinese investments in the U.S. has experienced a substantial decrease since the commencement of Donald Trump’s first presidential term. Analysts predict that this downward trend in Chinese investments is unlikely to reverse as Trump embarks on his second stint in the White House.
Trump’s Tough Stance on Chinese Goods
Upon entering his second term, Trump reinforced his tough position on Beijing by threatening additional tariffs on Chinese goods. Economists suggest that Trump’s idea isn’t geared towards incentivizing Chinese companies to invest in the U.S. but rather to keep China out of the U.S.
Bearing Witness to a Shift
The American Enterprise Institute data reveals a significant slowdown in Chinese-American investment deals. A mere $860 million flowed into the U.S. in the first half of 2024, in stark contrast to the $46.86 billion seen in 2017, at the beginning of Trump’s first term. The Chinese had previously made some high-profile U.S. acquisitions, including the purchase of the renowned Waldorf Astoria hotel in New York.
However, tighter controls over capital outflows from Beijing in 2017, followed by U.S regulations excluding investments in specific sectors have curtailed the flow of Chinese investments. Despite the slowdown, Chinese companies have gravitated towards smaller joint ventures or greenfield investments where businesses are built from scratch.
Chinese Partnerships with U.S. Companies
An exemplar of these smaller ventures is the joint partnership between Chinese battery manufacturing company EVE Energy and U.S. engine company Cummins’ Accelera division, Daimler Truck, and PACCAR. Their recent joint venture to open a battery factory in Mississippi, which will finally go into production in 2027, is estimated to generate over 2,000 jobs.
Repercussions of Covid-19 Pandemic
Despite the slowing investment flow, the U.S.-China Chamber of Commerce has primarily assisted Chinese e-commerce companies in setting up local offices during the pandemic period. However, the point of contention remains whether these smaller investments would help offset the impact of tariffs.
Last Spring saw more than 20 states implementing new restrictions on land purchases by Chinese citizens and companies or updating existing laws. With these changes coming into play, it’s understandable why companies are hesitant about making substantial investments.
Uncertainty Over Trump’s Policy
Trump’s policy unpredictability has added to the uncertainties surrounding Chinese investments. While the president-elect indicated that tariffs could potentially coerce Chinese investment or the construction of factories in the U.S., these are long-term processes that won’t materialize overnight. As such, Trump’s declaration of U.S. openness to Chinese companies in 2025 does not guarantee a similar stance by 2029.
The decreasing trend in Chinese investments in the U.S. is expected to continue due to the tough stance of President Trump on Beijing and the ensuing punitive tariffs. Despite this decreasing trend, smaller joint ventures and greenfield projects have emerged as alternative modes of investment for Chinese businesses in America. However, the unpredictable nature of Trump’s policy poses further uncertainty on Chinese investments in the U.S.