U.S.-China Bilateral Tensions Force Investments To Fall To Nine Year-Low

A research report shows that in the first half of the current year, investment between the United States and China have dropped to a nine-year low because of the bilateral tensions between the two countries with possibility of more Chinese firms having to face the pressure of divesting their US operations.

According to figures from consultancy Rhodium Group, in the in January to June period, there was a 16.2 per cent year on year drop in the flow of investment between the two countries – both direct investments made by companies as well as flow of venture capital, to touch $10.9 billion. In addition to the bilateral tensions, investments have also been affected by the novel coronavirus pandemic.    

In comparison, the flow of investments between the two countries was at nearly $40 billion in 2016 and 2017.

US President Donald Trump’s administration has sharply expanded actions to hobble Chinese companies citing national security threats allegedly posed by Chinese technology firms.

As a result of this attitude of the US administration, it has blacklisted the Chinese telecoms giant Huawei Technologies Co Ltd and has threatened to so the same against Semiconductor Manufacturing International Corp. The Trump administration has also ordered ByteDance, Chinese owner of the short video sharing app TikTok, to divest the US business of the app.

Currently, ByteDance has struck a deal with American companies Oracle and Walmart to try and convince the Trump administration to not impose the threatened ban on it. 

“At a time of rising discomfort with US-China technology integration numerous other companies – both Chinese firms operating in the U.S. and U.S. firms with a presence in China may be forced to divest,” the report said.

US tech companies could find it more difficult to do business in China because of the current attitude of the US government and its treatment of ByteDance s well as a the broader shift in policy of moving away from the US-China technology integration, the report said.

The report noted a 31 per cent year on year drop in investments by US firms in China during the first half of 2020 to reach a total of $4.1 billion. It also showed a rise of 38 per cent in the investments by Chinese companies in the United States to reach $4.7 billion.

Much of this was because of just one deal – a Tencent Music -led consortium’s acquisition of a minority stake in Universal Music group for $3.4 billion, the report noted.

(Adapted from USNews.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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