FDI Flat, VC Strong: China’s Investment in the US in 2021

Chinese foreign direct investment in the US fell from $7.5 billion in 2020 to $5.7 billion last year, marking a ten-year low. Investment was led by a handful of deals in non-sensitive sectors: entertainment, consumer products, and real estate. The muted FDI picture stands in contrast to Chinese venture capital investment in the US, which accelerated to a record $3.4 billion last year. FDI trends are likely to persist in 2022, and venture capital activity will likely moderate amid a broader slowdown in the US venture capital market.

Posted April 27, 2022
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The Gravity of Zero

Beijing is facing a new policy dilemma in grappling with how to exit strict measures to control the spread of COVID, with no clear solution on the horizon. The economic costs of these controls are only likely to escalate in 2022, given the continued spread of the Omicron variant, with little chance of eliminating the virus in China. But there are few scenarios for relaxing controls without seeing significant contagion that would undermine China’s political messaging of success in limiting the pandemic so far.

International travel restrictions are likely to remain in place for all of 2022 or longer. But following the Winter Olympics, the probability of Beijing relaxing local virus suppression measures will rise, particularly as economic and political costs escalate. Household consumption and services sector enterprises may not recover meaningfully this year, but there will be immediate pressures to at least keep ports and factories operating within an already flagging economy. Incentives for local officials can change quickly in China’s political system, and propaganda messages can reverse on a dime.

Posted January 21, 2022
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What Happens Next with Phase One?

With key aspects of the Trump-era phase one deal having now expired, questions loom about what comes next for US trade strategy toward China. Given domestic considerations in both countries, the prospect of a “phase two” deal covering substantive issues is remote. Instead, the Biden administration appears likely to focus efforts on litigating the shortfall in China’s purchases under phase one and outlining the structure of its regional strategy through the Indo-Pacific Economic Framework.

Posted January 21, 2022
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