Decoupling between the US and Chinese economies shifted into overdrive in the first quarter of this year, as the commercial impact of the coronavirus pandemic exacerbated what some analysts are calling a “cold war” chill in ties between the two countries. The value of newly announced Chinese direct investment projects into the US fell to just $2oom in the first quarter of this year, down from an average of $2bn per quarter in 2019, according to a report by research firm Rhodium Group and the National Committee on United States-China Relations, a non governmental organisation.
The fall comes after Chinese direct investment in the US dropped to the lowest level since 2009 last year – down from $2.7bn a quarter in 2018 and $8bn a quarter in the boom years of 2016 and 2017 – amid souring bilateral ties. Total Chinese direct investment into the US stood at $5bn, a slight drop from $5-4bn in 2018 and well off a recent peak of $45bn in 2016 when Chinese companies were much freer to acquire US counterparts, the report said.
“Both Washington and Beijing have blamed each other for failing to adequately respond to the virus, deepening the political and economic tensions that already existed in the relationship,” the report said. “The worsening bilateral relationship and a growing public backlash against China in the US make it likely that Chinese buyers will also face significant political opposition to any big acquisition,” the report added. Some analysts saw little optimism for an improvement in relations.
“The discontent in the US arising from the tech revolution and globalisation is so high that politicians have been looking, and will continue to look, for ways to exploit it,” said Chen Zhiwu, a professor at the University of Hong Kong. “The new cold war has been going on for a few years, with little trust left between the two. It would take a miracle for this to be reversed.”