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The investment trend between the US and China

The investment trend between the United States and China has shown a duality, according to a report by the US Congress.

Both economic powers are currently facing a trade war, which is related to the amounts of Foreign Direct Investment (FDI) sent between them.

Two-way FDI flows have slowed since 2016, while trade and investment linkages not included in FDI data (technology licenses, research, venture capital and financial investments) have expanded.

According to the US Bureau of Economic Analysis (BEA), net FDI flows from the United States to China in 2020 were $9.3 billion, and net FDI flows from China to the United States were $4.3 billion.

The US Congress report shows that the US FDI stock in China was $123.9 billion, while China’s FDI stock in the US was $54.9 billion, based on beneficial ownership (UBO).

In 2020, China accounted for about 1% of the total FDI stock in the United States, while China comprised 2% of the total US FDI stock abroad.

As of December 2020, US investors held $1.15 trillion in Chinese stocks and bonds, while Chinese investors held $1.4 trillion in US debt and $720 billion in US stocks, according to US government and private estimates.

Investment trend

As of November 2021, China and Hong Kong held $1.08 trillion and $235 billion, respectively, in US Treasury securities, making China the second largest foreign holder after Japan (this data does not include the purchase of securities through offshore financial centers).

China is the second largest global economy and a major global market for the United States.

At the same time, the same report indicates, US companies face significant trade barriers, unfair practices and lack of reciprocity in key areas.

China’s state-driven economic, trade, investment and technological practices and the challenges they pose to US economic and technological leadership are of concern to many in the US Congress.

China continues to require the transfer of critical US capabilities to China to operate in strategic areas.

The report argues that many of China’s practices distort markets and undermine fair competition in China and around the world as PRC companies expand into areas China restricts domestically.

 

Redacción Opportimes

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