New
York (CNN Business)The Chinese investment boom into
America has almost completely vanished.
Foreign
direct investment from China into the United States plummeted by 83% in 2018,
according to a report released Monday by
law firm Baker McKenzie.
Not only are
Chinese firms drastically scaling back investments,
but they've embarked on a record-setting wave of sales
of real estate, hospitality and entertainment businesses.
Including
those sales, net Chinese foreign direct investment into North America turned
negative in 2018 to the tune of $5.5 billion, according to Baker McKenzie.
Another $12 billion of Chinese assets around the world are expected to be sold
this year, the report said.
The
evaporation of Chinese money in the United States reflects self-imposed
restrictions by Beijing on investments outside the country. The trend was
exacerbated, though, because Washington has been tightening foreign investment
reviews. The US-China trade war is also a contributor.
"The
Chinese put handcuffs on themselves on investing abroad," said Scott
Kennedy, director of the Project on Chinese Business and Political Economy at
the Center for Strategic and International Studies. "With the arrival of
the Trump administration, the United States put a not-for-sale sign on the
door."
After spending heavily on
American real estate, transportation and infrastructure, Chinese investment in
these sectors has "largely disappeared," the Baker McKenzie report
found.
China has
retreated from other major markets — foreign direct investment into as a whole
Europe tumbled by 70% in 2018, for example. But the United States has
experienced the sharpest decline.
Some large
economies, including France, Germany, Spain and Sweden, experienced an increase
of investment from China, Baker McKenzie said.
Canada also
bucked the trend, with Chinese investment spiking by 80% to $2.7 billion last
year. Including divestitures, Canada actually enjoyed more Chinese investment
than the United States in 2018, Baker McKenzie said.
Chinese
investment into the United States peaked at $45.6 billion in 2016, a year that
saw HNA splurge on a 25% stake in Hilton
and Anbang Insurance acquire a string of high-end hotels.
But foreign
direct investment slowed to $29 billion in 2017, when China imposed
restrictions on outbound investments in a bid to stem capital outflows.
Investment in the United States then shrank to just $4.8 billion last year amid
Washington's crackdown on China — a "huge drop," Kennedy said.
In the
meantime, US officials are scrutinizing Chinese investment with more intensity.
The
Committee on Foreign Investment in the United States has rejected several
high-profile transactions, including Broadcom's (AVGO) $117 billion bid for
Qualcomm (QCOM). Last year, President
Donald Trump signed legislation expanding the power of CFIUS to block foreign
deals for national security purposes.
At the same
time, some of China's most voracious buyers of American assets have come under
pressure from Beijing.
For example,
early last year Beijing seized control of Anbang, the insurance giant that in
2014 completed a $1.95 billion purchase of the iconic
Waldorf Astoria. The Chinese government later pumped nearly $10 billion into Anbang.
Likewise,
HNA, a conglomerate that grew out of an airline, has gone on an epic buying spree
in recent years. The Chinese company purchased chunks of everything from
Deutsche Bank (DB) to Hilton. But HNA has
since moved to unload businesses
in response to Beijing's crackdown on foreign purchases and concerns about the
company's massive debt.
"HNA
had its wings massively clipped," said Kennedy.
Correction:
An earlier version of this report incorrectly described part of HNA's business.