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Signs with the US flag and Chinese flag are seen outside a store selling foreign goods in Qingdao in China's eastern Shandong province on September 19, 2018. – China on September 18 announced tariffs on US goods worth $60 billion in retaliation for President Donald Trump's decision to slap duties on $200 billion in Chinese products next week. Photo: Agence France-Presse
EconomyChina Economy

US investment in China in sharp decline, as trade war continues to hamper business

  • American investment into China grew by 24.3 per cent in the January to April period versus a year ago, down from 71.3 per cent in the first quarter
  • In the month of April, total foreign investment into China rose 6.3 per cent in yuan terms and 2.8 per cent in dollar terms down from 8 per cent and 4.9 per cent in March
China economy
Orange Wang
Orange Wang
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American direct investment in China grew by 24.3 per cent in the January to April period compared with the same period last year, a sharp deceleration from the 71.3 per cent growth in the first quarter of 2019, the Chinese Ministry of Commerce announced on Thursday.

The deceleration implies a sharp decline in foreign direct investment (FDI) in April, though the ministry did not release figures for the month alone.

The decline in yuan terms comes as the ongoing trade war between the world’s two biggest economies led to a spike in tensions over the past week, which has threatened to upend commercial relations.

In dollar terms, US investment growth in China fell to 3.5 per cent over the first four months of the year, compared to 3.7 per cent in quarter one.

Genuine bundles of Chinese 100 yuan banknotes and US$100 banknotes are arranged for a photograph. Photo: Bloomberg

The Ministry of Commerce (Mofcom) figures show that China’s overall inbound FDI growth fell to 6.4 per cent, worth 305.24 billion yuan (US$44.36 billion) in the January to April period. Over the first quarter, on a year-on-year basis, FDI growth was 6.5 per cent.

In the single month of April, total FDI into China rose by 6.3 per cent in yuan terms and 2.8 per cent in US dollar terms, down from 8 per cent and 4.9 per cent in March, respectively.

Sector-wise, strong investment growth was seen in information services (up 57.4 per cent in January-April versus a year earlier), research, development and design services (up 49.1 per cent), and scientific and technology services (up 96.3 per cent).

Investment in China’s hi-tech industries saw 28.1 per cent year-on-year growth, but the pace was much slower than the 50.6 per cent gain the sector reported in the first quarter, Mofcom said.

China’s outbound investment, meanwhile, rose by 3.3 per cent from a year ago to 233.41 billion yuan, (US$34.64 billion) during the January to April period, a smaller gain than the 4.8 per cent growth reported in the first quarter, according to government figures.

The pace of US investment in China fell in the period from January to April. Photo: Reuters
The figures were announced as US-China efforts to reach a deal to end the trade war hit an impasse, after it seemed a deal was within reach. The past week has seen the imposition of tit-for-tat tariffs, with the US announcing preparation to roll-out 25 per cent tariffs on almost all remaining Chinese goods as soon as July if no trade deal is reached.

Despite having embarked on large-scale stimulus measures earlier in the year, Beijing must now assess how to deal with the new economic headwinds it is facing.

Gao Feng, a Mofcom spokesperson, said the risks of the trade war could be controlled by China. He said Beijing was monitoring the effects and would take required actions.

This article appeared in the South China Morning Post print edition as: Growth in US investment in China slows sharply
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