China has recently taken steps to curb local companies’ investments in the United States, according to sources familiar with the matter. This move is seen as a strategic maneuver that could give Beijing more leverage in potential trade negotiations with the Trump administration.
Several divisions of China’s National Development and Reform Commission (NDRC), the country’s leading economic planning agency, have been instructed to delay the registration and approval processes for firms seeking to invest in the U.S. This directive has been in place for the past few weeks, as sources close to the situation, who requested anonymity, revealed.
Although China has previously imposed restrictions on certain overseas investments, often due to concerns about national security or capital outflows, these new measures highlight the escalating tensions between the world’s two largest economies. The ongoing trade conflict has intensified, with President Donald Trump escalating tariffs on Chinese goods. In 2023, China’s outbound investments into the U.S. amounted to $6.9 billion, according to the latest data.
The restrictions are not expected to affect existing commitments by Chinese companies or their holdings in U.S. financial assets, such as Treasury bonds. However, the reasons behind the NDRC’s decision to suspend processing applications and the duration of this suspension remain unclear.
In response to the Bloomberg report, U.S. equity futures dipped to session lows, and European stocks followed suit, extending their declines. The uncertainty surrounding these developments is significant for businesses navigating the increasingly complex global trade environment.
On Wednesday, President Trump unveiled plans for reciprocal tariffs targeting U.S. trading partners, with China now facing tariffs of at least 54% on many goods. This move follows a February memorandum directing a key U.S. government committee to restrict Chinese investments in critical sectors like technology and energy.
China has already begun scrutinizing outbound investments more closely, especially after experiencing record capital outflows that put pressure on the yuan earlier this year. While the latest restrictions primarily target corporate investment in the U.S., the move adds further uncertainty for companies looking to move production abroad in an attempt to bypass the growing trade barriers.
For example, CK Hutchison Holdings Ltd., a Hong Kong-based conglomerate, found itself caught in the middle of the U.S.-China standoff. The company agreed last month to sell 43 ports, including two in Panama, to a BlackRock-led consortium for $19 billion. The deal sparked backlash from China, which has since ordered state-owned companies to halt new collaborations with businesses connected to Li Ka-shing and his family.
Recent data from China’s Ministry of Commerce reveals that Chinese outbound investments into the U.S. fell by 5.2% in 2023, even as investments in other countries rose by 8.7%. By the end of 2023, China’s investment in the U.S. accounted for just 2.8% of its total foreign investments.
Chinese companies planning overseas investments must navigate a regulatory approval process that typically involves the Ministry of Commerce, NDRC, and the State Administration of Foreign Exchange. The latest restrictions add to the growing uncertainty surrounding global investments as China and the U.S. continue to lock horns in the trade arena.
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