Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Analysis: Barriers to China-U.S. investments could outlast Trump

Stock Markets Nov 03, 2020 03:20AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. Chinese and U.S. flags flutter near The Bund in Shanghai

By Kane Wu and Echo Wang

HONG KONG/NEW YORK (Reuters) - President Donald Trump raised barriers for Chinese companies seeking to invest or raise money in the United States that will have a lasting impact even if he does not win a second term, according to dealmakers and policy experts.

Chinese acquisitions of U.S. companies dropped to $1.86 billion last year, a tiny fraction of the $61 billion they totaled in 2016, when they were at their peak right before Trump came into office, according to Refinitiv data.

Chinese venture capital investments into the United States, which peaked in 2016 at nearly $15.7 billion, totaled just $6.7 billion as of Oct. 27, according to PitchBook data.

Foreign direct investment from China into the United States has declined by 90% to $4.7 billion so far this year compared to 2016, according to the Rhodium Group.

Much of this is the result of Trump's policies. The United States blocked many Chinese acquisitions, especially of U.S. technology firms, on national security grounds, and even ordered some Chinese firms such as the owners of social media apps TikTok and Grindr to divest them. U.S. stock exchanges raised their listing standards after many investors got burnt in auditing scandals involving Chinese firms, including coffee chain operator Luckin Coffee (OTC:LKNCY). And Chinese nationals found it harder to secure U.S. work permits.

This trend could continue, even if China-U.S. tensions over hot-button issues such as trade and the future of Hong Kong eased, dealmakers say. This is because concerns about corporate China abusing its technologic prowess and misleading investors are shared by both Republican and Democratic U.S. lawmakers.

"The United States no longer views China as a partner, but an enemy and a threat... America has become very unfriendly soil to anything Chinese," said Fred Hu, chairman of Chinese private equity firm Primavera Capital Group, which has investments in U.S. companies. He added that U.S.-China relations were unlikely to improve in the short term.

Under Trump, the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security risks, toughened its stance on Chinese companies.

CFIUS reviews are confidential, and the secretive government panel does not disclose how many deals it blocks each year. But in its annual reports to the U.S. Congress, CFIUS has revealed its heightened scrutiny of Chinese deals; it reviewed 140 deal applications by Chinese acquirers in the first three years of the Trump administration, more than those from any other country, compared to 20 such applications in the first three years of Barack Obama's administration. This is despite Chinese applications with CFIUS for U.S. deals declining from 60 in 2017 to 25 in 2019.

Among the deals that CFIUS blocked under Trump were Chinese financial technology giant Ant Group's $1.2 billion acquisition of U.S. money transfer company MoneyGram International Inc (O:MGI) and China-based semiconductor investment fund Unic Capital Management's $580 million acquisition of U.S. semiconductor testing equipment company Xcerra Corp. Some Chinese acquirers also abandoned their U.S. acquisitions before CFIUS blocked them.

"CFIUS has brought great changes for Chinese firms' overseas acquisitions, in the tech sector especially," said Peter Kuo, a partner in China-backed private equity fund Canyon Bridge, whose attempted $1.3 billion acquisition of U.S. chip maker Lattice (OTC:LTTC) Semiconductor Corp (O:LSCC) was thwarted by CFIUS in 2017. The fund is now focused on investing in Chinese companies.

The U.S. crackdown spilled over into venture capital investments. Many Chinese venture funds and some state-backed ones, who flooded into Silicon Valley several years ago in the search for reasonably valued unicorns, left the U.S. in the last couple years, as CFIUS also scrutinized sizeable minority stake investments. Some Chinese investors into U.S. venture capital firms also retreated.

"Now we have zero Chinese investors in our fund," said Edith Yeung, general partner of Silicon Valley-based venture capital fund RaceCapital. She said she had to reject many Chinese investors from her fund due to the regulatory risk.


Trump said this year he was also looking "very strongly" at the possibility of delisting Chinese companies that do not comply with U.S. accounting standards from U.S. exchanges, but did not follow through on that threat.

While the total value of Chinese companies listing in New York has reached $2.5 trillion so far this year - almost double the total four years ago before Trump came into office - Nasdaq has updated its rules to make it more difficult for small Chinese firms to float on their exchanges.

As a result, only five Chinese IPOs under $25 million landed in New York this year, compared to nine last year.

Policy experts said deep U.S. suspicion of China's economic power, technological advances and accounting standards will likely result in many of the hurdles to cross-border investments remaining in place even if Trump's Democratic challenger Joe Biden succeeds him in January.

"Our take is that the U.S. containment on China is bipartisan," Natixis economists wrote in a note last week.

Analysis: Barriers to China-U.S. investments could outlast Trump

Related Articles

Amazon faces UK probe over marketplace practices
Amazon faces UK probe over marketplace practices By Reuters - Jul 06, 2022

(Reuters) - Britain's antitrust watchdog said on Wednesday it has started an investigation into Inc (NASDAQ:AMZN) on concerns the U.S tech giant's practices affecting...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email