Chinese investments in the U.S. hit an all-time high this year, surging 359% from the year before. But don’t expect a repeat performance in 2017. Thanks to growing U.S. protectionism and stricter Chinese capital controls, the flood of capital from China could slow down.
According to Mergermarket, Chinese companies invested $53.9 billion in the U.S. via 75 deals during the year (as of Dec. 12). Compare that to a year ago when Chinese investments in the U.S. totaled $11.7 billion. The steep increase in investments from China has stoked concerns about national security.
Since February, more than 150 Republican and Democrat members of Congress have written letters to the Department of the Treasury, urging change to strengthen the authority of the Committee on Foreign Investment in the United States, also known as CFIUS. The Government Accountability Office in October said it would examine whether CFIUS has enough authority keep track of the increasing number of deals by Russian and Chinese buyers. Adding to the momentum, the U.S.-China Economic Security Review Commission, in an annual report to Congress, recommended that the U.S. ban Chinese state-owned enterprises from buying U.S. companies.
The impact of Trump’s rhetoric
“Changes are more likely today than at any other time since 2007, when CFIUS’s authority was codified by Congress. And, the impetus for possible change is broader than the President-elect’s forceful calls to change the U.S.-China trade relationship,” said Mario Mancuso, partner at Kirkland & Ellis in Washington, D.C. and former U.S. Under Secretary of Commerce, Industry and Security. Mancuso added that while fundamental change of CFIUS would need Congressional sanction, meaningful change could also happen via executive order.
President-elect Donald Trump’s anti-China rhetoric may also have some impact on Chinese investments. Though it’s unclear yet what he intends to do, Trump has accused the country of currency manipulation and threatened to slap steep tariffs on exports from China. He’s also strained relations with China by questioning the long-standing “One China” policy.