As the trade war between the world’s largest economies drags on, foreign direct investment (FDI) between China and the United States dropped nearly 60 percent year-over-year in 2018.
Data from economic research firm Rhodium Group showed that China shaved foreign direct investment in the US by 88 percent, from a peak of $46.5 billion in 2016 to just $5.4 billion in 2018. According to preliminary figures through April of this year (which account for investments by mainland Chinese companies), transactions totaled $2.8 billion. Meanwhile, American FDI in China dropped only slightly to $13 billion in 2018 from $14 billion in 2017.
“The fact that the foreign direct investment has fallen so sharply is symbolic of how badly the economic relationship between the United States and China has deteriorated,” Eswar Prasad, former head of the International Monetary Fund’s China division, was cited as saying by the New York Times. “The US doesn’t trust the Chinese, and China doesn’t trust the US.”
According to recent research by the National Association of Realtors, purchases of homes in America by Chinese buyers slid by 56 percent to $13.4 billion in the year to March.
“The magnitude of the decline is quite striking, implying less confidence in owning a property in the US,” said Lawrence Yun, chief economist at the realtor’s group. Still, China remained the top foreign buyer of US properties from April 2018 to March 2019.
The two countries have been locked in a trade war since last year, when Washington slapped 25-percent tariffs on $50 billion worth of Chinese technology products, triggering a similar response from Beijing. Since then, the sides have exchanged several rounds of tit-for-tat levies. In June, the Trump administration increased tariffs on $250 billion worth of Chinese goods to 25 percent, and China hit back, raising tariffs up to the same rate on 5,000 US goods worth $60 billion.
The US and China agreed not to impose new tariffs following talks between the two nations’ leaders on the sidelines of the G20 summit last month.