Investment between China and the US is down

China’s investment in the US has tumbled in 2023 to its lowest level in 17 years, according to at least one measure (mergers and acquisitions).

And the trend goes both ways, with US investment into China on track to hit its lowest levels in at least five years, according to a similar measure.

It’s not just investment, either. The US has bought 24% less stuff from China this year, while China has likewise purchased less from the US (factoring in inflation).

So what’s going on? A simple answer is that commercial ties are responding to strained political ties. The US now:

  • 🧾 Has tariffs on around two thirds of Chinese imports
  • 🎖️ Restricts US investment into Chinese firms with military links
  • 👨‍💻 Limits China’s access to certain advanced US tech, and
  • 💻 Is reportedly set to announce new restrictions on investment into China’s quantum, AI and semiconductor sectors any day now.

Meanwhile for its part, China:

  • 📈 Restricts certain Chinese firms from listing their shares abroad
  • 🗿 Limits critical mineral exports that are key to the US tech sector
  • 👮 Has raided several US-linked businesses this year, and
  • ⚖️ Has long faced US allegations of unfair practices like IP theft, forced tech transfer, and vast subsidies for preferred firms.

So US-China tensions clearly make for a tough business environment.

Intrigue’s take: But of course, the answer is still not quite so simple. China’s investment has dropped in multiple countries, not just the US. Its inbound investment has dropped globally, not just from US investors. And China is selling less stuff globally, not just to the US.

So US-China ties are clearly a factor, but there’s another story playing out here, too: China’s unique economic model is under pressure; its approach to the private sector has spooked businesses; and so a lot of this feels less about US-China ties, and more about China itself.

Also worth noting:

  • US Treasury Secretary Janet Yellen said during her visit to Beijing last month that a complete US-China decoupling would be “virtually impossible” and “destabilizing for the global economy”.
  • McDonald’s plans to open ~900 stores in China this year. Starbucks plans to open ~2,800 stores there within two years.
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