A new study reports that investment between the U.S. and China will drop significantly in 2020, reaching its lowest level in nine years. The main reason for the impact on investment is the deterioration of relations between the two countries, with many Chinese companies forced to reduce their operations in the United States.
The Rhodium Group, a New York-based economic consulting firm, said in the report that from January to June this year, direct and venture capital investment by companies from both countries totaled $10.9 billion, down 16.2 percent from the same period last year. In 2016 and the first half of 2017, bilateral investment was close to $40 billion. Another factor contributing to the drop in investment in the first half of 2020 was the neo-crown virus pandemic, the report said.
In addition, the Trump administration increased restrictions on Chinese technology companies over national security risks during the six months. Chinese telecom giant Huawei was placed on a trade blacklist, SMIC, China’s largest semiconductor manufacturer, received a similar warning, and Chinese tech company BytePop was ordered by the U.S. government to sell its short-form video sharing app TikTok’s U.S. business or be blocked.
WordPress is currently seeking approval from the US and Chinese governments for a deal to align TikTok with US enterprise database software company Oracle. President Trump originally demanded that TikTok sell its U.S. business to a U.S. company or be blocked. But according to the latest news, TikTok sees a partnership with Oracle as the way to go. Oracle is buying a 20% stake in TikTok and taking over the storage and management of TikTok’s U.S. user data. Observers say the deal falls far short of Trump’s requirements and would be very difficult to get approval from the U.S. government.
The way the U.S. treats ByteTok and the reversal of momentum in U.S.-China tech integration could lead to some policy changes that make it more difficult for U.S. tech companies to grow in China, the Rongding Group report said.
The report also notes that in the first half of this year, investment by U.S. companies in China declined sharply, by 31 percent. The total amount was only $4.1 billion. Chinese investment in the U.S., on the other hand, increased by 38% to $4.7 billion.
A large portion of the $4.7 billion came from Tencent’s $3.4 billion acquisition of a minority stake in Universal Music, the world’s largest record company. If Tencent’s investment were subtracted, Chinese investment in the U.S. would also show a significant decline.
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