 "US and China have long appeared to be rushing head-first into a trade war. Representational Image- FP")
China appears to be tightening control over international corporate ambitions, while leveraging investment as a potential bargaining chip in fraught trade negotiations.
The country has moved to restrict outbound investment into the United States, in what appears to be a well-though out response to escalating trade pressure from Washington.
Officials at several branches of China’s National Development and Reform Commission (NDRC), the country’s top economic planner, have reportedly been told in recent weeks to delay the registration and approval process for companies seeking to invest in the US, Bloomberg reported citing sources.
What numbers say
China’s outbound investment into the US fell to $6.9 billion in 2023, according to the most recent data available: a 5.2 per cent decline on the year despite overall foreign investment by Chinese firms rising by 8.7 per cent. The US now accounts for just 2.8 per cent of China’s total overseas investment stock.
Sources mentioned that there is no current indication that the freeze will extend to existing Chinese corporate holdings in the US or to Beijing’s broader portfolio of financial assets, including its substantial holdings of US Treasuries.
The immediate impact is expected to be felt by Chinese corporates looking to expand in the US. Companies attempting to shift production away from mainland China to avoid tariff walls may now face additional hurdles from Beijing itself.
US-China tensions simmer
While Beijing has previously exercised caution over certain overseas investments due to concerns about national security and capital flight, the latest move is different. It comes as the rift between the world’s two largest economies deepens while US president Donald Trump sharpens his rhetoric and reintroduces steep tariffs on Chinese imports.
The timing of the restrictions is crucial. On Wednesday, Trump unveiled proposals for new “reciprocal tariffs” targeting a range of countries, with China now facing duties of at least 54 per cent on several categories of goods.
In February, the White House also directed a key interagency committee to limit Chinese investment in sectors deemed critical to US national security, including technology and energy.