Business

Behind China’s Increasing Investments in the US

As a result of the country’s slowed growth and depreciating currency issue, China’s investments in the US have reached staggering heights, with an estimated sum of $53.9B. It could have been Japan, another world power to place promising investments, though tensions have run high especially since copies of books that imply the Chinese have fabricated the Rape of Nanking for their agenda was distributed at a Japan hotel chain. Looking to forge relationships and maximize opportunities, Chinese private and state owned companies’ FDI have led the Chinese in being the single largest group of foreign investors in the US. Chinese investment comprised 29% of all foreign investment in the US, with a large number of their investors focused on commercial real estate, which reached a record high of $19.2B. In hopes of resolving their internal economic problems, the Chinese have sought to gain better returns through their overseas investments. Many of their investments were secured in the forms of “mega deals”, as 62% of their investments were over $1B. Many of these “mega deals” were by Chinese insurance agencies. More than half of all Chinese investors were Chinese life insurers. Popular groups, Anbang Insurance Group and China Life Insurance closed their own “mega deals” by dealing with hotels and resorts. Only 1% of China’s insurer assets are invested in foreign countries, and only a fraction of that is invested in the US. The Chinese Insurance Industry is worth an estimated $1.83B.

China’s investments in the US, which are said to be a 359% increase from the previous year’s total investment in the US, is expected to have tremendous returns. Although it may seem that China’s investments are the solution to their economic issues, they may not be able to continue with their FDI in the US. This is due to President Donald Trump’s anti-China rhetoric. His views on Chinese investment may have negative implications on the country’s investments. Also, recently there have been stricter Chinese capital controls in the US, which were most likely a result of growing protectionism in the US and could mean a dramatic decrease in China’s investments in the US. Normally, a slowed economic growth in China and an improving economy in the US would usually give China an economic boom, however, the political strain between the two countries may lead to unnecessary conflict and poses a risk to many potential investments and deals.

Despite the Trump administration and their increased protectionist policies, Chinese businesses continue to show interest in investing in the US. Dalian Wanda, the richest man in China, says he enjoys investing in the US and has no plans of slowing down or stopping, though new research shows that new restrictions have already been implemented and are slowly taking effect.

Due to President Donald Trump’s unexpected behavior, he somewhat resembles a wildcard, as no one really knows what to expect from him. Any unexpected change is more likely to happen today than any other time since 2007. The Trump administration’s uncertainty has led to the appointment of China hawks to oversee the trade policies most likely mean that China won’t repeat that same level of investment. The Trump Administration has a large impact on China’s investment and causes an unnecessary political strain between the two countries. As a result, it is very likely that there will be a decrease in China’s investments. Unexpected behavior under Trump’s presidency towards Chinese FDI in the US will likely increase, though to what extent is unknown. Given his untested and relatively new political background, and that of his emerging cabinet, unexpected behavior is to be expected.

 

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Joyce Randall

Joyce Randall

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