Chinese investments in the United States have witnessed a staggering decrease since the onset of Donald Trump’s first term as President. This trend, if analysts are to be believed, appears set to continue, especially with Trump poised to re-enter the White House. He has suggested that significant tariffs on Chinese imports will be implemented swiftly following his inauguration, reinforcing the already strained relationship between Washington and Beijing. As economist Rafiq Dossani of the RAND Corporation highlights, the focus seems less about attracting investment from Chinese firms and more about building barriers to their entry.
The past few years present a stark contrast, with Chinese companies once participating actively in notable U.S. acquisitions. High-profile investments, such as the purchase of the Waldorf Astoria hotel, have long been replaced by a notable hesitance. The reality is that recent statistics reveal a dramatic plunge in Chinese investment to just $860 million in early 2024, greatly diminished from the $46.86 billion peak recorded in 2017, as reported by the American Enterprise Institute (AEI).
Several converging factors account for this decline. On one hand, tightening controls over capital outflows from China since 2017 have diminished the ability of Chinese companies to invest abroad significantly. On the other hand, the U.S. government’s regulatory moves, aimed at scrutinizing and often restricting Chinese investments, have created an unfriendly environment for Chinese firms seeking opportunities in America. Danielle Goh, a senior analyst at the Rhodium Group, emphasized that the foreseeable future does not bode well for a recovery to the heights of the investment levels seen just a few years ago.
Rather than pursuing substantial acquisitions, Chinese companies are increasingly favoring less conspicuous avenues, such as forming joint ventures or undertaking greenfield investments—building new businesses from the ground up. A noteworthy example can be seen in the collaboration between Chinese battery manufacturer EVE Energy and U.S.-based Cummins’ Accelera division, which plans to develop a battery factory in Mississippi, generating over 2,000 jobs by the end of 2027.
As state governments in the U.S. demonstrate growing skepticism towards Chinese investments, the regulatory landscape becomes even more challenging for potential investors. Reports have revealed that over 20 states are actively implementing or updating restrictions concerning land purchases by Chinese companies. This kind of hostility extends beyond mere investment scrutiny. The recent attempts by Chinese hackers to breach a U.S. government office monitoring foreign investments signify increasing tensions and concerns about national security.
Moreover, tariffs have become a tool used by Trump and his administration to potentially leverage investment commitments from Chinese companies. As Trump stated during a Republican nomination speech, his administration intends to prioritize the creation of American jobs and requires foreign companies to invest domestically if they wish to compete in the U.S. market. However, this approach raises questions about the reality of large investments, which are typically long-term processes that cannot be activated overnight or contingent on a leader’s erratic rhetoric.
Despite potential openness purported by Trump toward Chinese investments, the bridging of ideological divides poses inherent challenges. Both countries seem entrenched in conflicting national priorities, leading to a stagnant investment landscape that hampers bilateral economic growth. Derek Scissors from the AEI points out that even if Trump declares openness to Chinese investments, guaranteeing that sentiment remains through the next several years is extraordinarily uncertain.
Additionally, foreign investments are not simply influenced by the political arena. The complexities of supply chains, shifting consumer demands, and evolving global economic conditions are all factors that potential investors, including those from China, must navigate. It is crucial to recognize that while regulators may become more lenient or supportive over time, investments are long-term commitments that require stability, shared objectives, and a conducive environment to flourish.
The decline of Chinese investments in the U.S. reflects a broader narrative of geopolitical rivalry and fluctuating policy directions. Despite calls from Trump for increased investments as part of his overarching economic strategy, the reality remains stark: regulatory scrutiny, state-level restrictions, and geopolitical mistrust are formidable barriers to restoring Chinese investment levels to previous highs. While global landscape dynamics continue to evolve, it appears that both nations may need to reassess their strategies and approaches to foster healthier economic relationships. Without a clear framework for cooperation, the potential for growth and mutual benefit remains significantly hampered.