As China’s economy has grown, its investments in U.S. industries have risen. This seems like a natural correlation, but something strange happened after 2016: The trend was reversed.
As seen in the chart below, after a high of 177 deals worth $45.6 billion in 2016, Chinese investment into the United States plummeted to just 36 deals worth $2 billion in 2018—the lowest amount in at least eight years.
The timing of that decline in investment coincides with the election of U.S. President Donald Trump, whose administration has imposed tariffs on an unprecedented $200 billion in Chinese goods. But that’s only part of the story. According to the Rhodium Group’s China Investment Monitor, Beijing’s regulatory crackdown on outbound capital has caused much of the decline in investment.
Michigan presents a tighter snapshot of the national trend. From 2013 to 2016, China’s investment into the state’s automotive industry increased from $10 million to $920 million. By 2018, all but $11 million of those deals vanished.
As the chart displays, automotive investment also fell between 2010 and 2013, when Detroit suffered the impacts of the 2008 recession, along with General Motors’ and Chrysler’s brushes with bankruptcy. Then-Gov. Rick Snyder spent much of that time actively courting Chinese business. The ready talent pool from the Detroit Three (General Motors, Ford, and Fiat Chrysler), combined with cheap office space and a never-ending Chinese demand for cars, eventually proved irresistible.
New Chinese and U.S. policies, however, suggest it will take a lot more than those advantages to bring business back this time.
