China fact of the day

After years of rapid growth, China’s investment in the US is dropping rapidly. From $56bn in 2016, it has fallen to less than a quarter of that in 2018.

That is from Ed Luce at the FT.

Comments

True. With modification, also true.

"After years of rapid growth, other countrys' investment in China is dropping rapidly..."

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I farted.

So it has come to this. Maybe Americans should not have exchanged their souls and sold their children in bondage for a mess of pottage (easy credit, investments and cheap trinkets).

Get the U.S. out of China and get China out of the U.S.

56 billion? that seems low. but a 75% drop would be quite a downwards draft for investments, nicht wahr? (is that the rate of increase? or total cumulative?)

Cumulative. https://www.wsj.com/articles/chinese-investors-pulled-back-in-u-s-in-2017-1532977588

WSJ:
2016 $40.4 Billion
2017 $39.5 Billion

FT:
2016 $56 Billion
2018 $16 Billion

https://www.cnbc.com/2018/07/05/ripple-effect-from-pending-us-china-trade-war-drop-in-fdi-worldwide.html

CNBC:
In the first half of 2017, China FDI to US fell more than 90 percent in the first half of 2017.
incoming $1.8 Billion, outgoing $9.6 Billion.

State social-capital-ism is nimble. I'll give them that. And of course, it would be nuts to increase investment in a country that is increasingly likely to freeze assets (even if that probability is still low).

As far as I can tell, annual US investment is around $4Tn so if China's investment goes to 0, who cares?

Who cares? At the margin more investment is certainly better.

And this was probably avoidable. We could have created a plan to protect the things we thought important, like IP or even US manufacturing in general, anc charted a glide path to get there.

Trade "war" was unnecessary, a personality thing, for a petulant man-child.

What, you want *less* investment to improve America? That sounds "fuller" if you know what I mean.

No. There’s no option of “protect aer jaerb” / IP protection and selling in China.

It’s one or the other. Since we used to have adults in charge, we accepted reality as reality.

Are you saying you reject the free rights of individuals and corporations in America to make deals in China?

That was of course completely independent and off tangent to China investing in America, but I can adjust.

Suppose one believes, as it not at all unreasonable, they China has overstepped some obvious lines in the sand re: IP etc. How would suggest we react? Do nothing? It would you write a letter, lol? Keep in mind there are those on both sides of the aisle who believe China to have acted unconscionably.

You have to divide it down. If Apple understands the risks in China, and wants to sign a phone assembly contract, what are you going to do? If Intel is sitting at home and has a network incursion, what are you going to do?

I say those are different problems with different responses. I would probably put a low-ish tariff on all imported goods, and I would make US network security a national priority.

Neither of those require a trade war, nor grandstanding by public officials.

The most posterous thing about the Trumpists though, is that they think taxing Canadian steel is going to somehow secure the American corporate data networks.

But then it was never really about IP.

This whole IP angle is nothing but lipstick on a pig.

He knows, we know, he knows we know.

In which Trumpists fully reject individual rights to trade?

Is this the insular end game to America first? America with currency controls?

This is really more of a United States fact than a China fact. Total foreign investment in the US, not just by the Chinese, is down 65% from 2016: https://www.cbsnews.com/news/foreign-investment-in-u-s-dropping-dramatically-under-trump/. Given recent US stock market performance, maybe these foreign investors were onto something.

Even after the recent drop, the Dow is up more than 20% since Trump's election.

Given the fundamentals, meh.

Given recent US stock market performance, maybe these foreign investors were onto something.

Actual divestment of US stocks by Chinese entities is a significant part of stock market performance.

You mean the 20% rise?

Better raise tariffs to force China to invest more.

Using "public" data, ie, Census has access to "secret" data, say the transactions of a Koch industry which reports almost nothing to the public and every report required to government must be kept secret by law, the following website lets you compare FDI between China and US:

https://rhodiumgroup.gistapp.com/us_china_foreign_direct_investments

Starting in the later years of Bush and pushed by Obama, China increased its FDI in the US to reduce its balance of payments surplus. Meanwhile, China and US both promoted steady US FDI in China.

Of total China FDI in US since 1990 totalling $140B, $40B is real estate/hospitality, $17B ICT eg tech, aka cell phones and the cloud, $17B transport, $14B energy, $9B entertainment, mostly film, $7B ag/food, $7B FIRE.

China's ICT FDI is seen by many as "theft" even tho China is buying stuff Wall Street MBAs, et al consider dogs that need to be turned innto cash by any means because profits are doomed. In fact, that represents probably half China FDI.

PCs, computers, doomed, wealth being destroyed by falling profits.
Semiconductors, doomed by competition driving down profits
Food, doomed by too much supply driving down profits

Etc.

Remember all the computer companies, PC makers, Chip makers, cell phone equipment makers in the US in the 90s?

90% are gone, swallowed by a few companies for high margin lines, and the zero profit lines owned by foriegners, with China being a late comer in buying.

Consider, chip making leadership is outside the US, with Intel losing ground by focusing on growing profit instead of being paranoid, buying competitors so it doesnt need to be paranoid. Is Taiwan China? Either way, leading edge tech needing chips needs Korea or Taiwan, and both do business in China.

China is following the path or Japan, Korea, and Taiwan which successively "stole American jobs". Japan stealing steel and auto jobs, then Korea stealing them, Japan stealing consumer product jobs, then Taiwan, etc.

In the 90s, my peer's jobs were under threat from Asia when Texas based Dell outsourced PCs to Asia targeting Compaq, forcing Compaq into chaos which forced every other computer company into chaos of erratic and conflicting strategies. The only winner from the US Wall Street drive for only high profit margin computer lines of business was Asia, especially Korea, Taiwan, and especially China. Think of Lenovo.

FDI by China in the US occurred almost entirely under the Obama administration. US FDI in China has been ongoing for a coiple of decades at a stready rate. While OA pushed this China FDI, but when Walll Street wanted to sell corporations to China, OA then reacted in fear and blocked many deals on "national security".

What is your point?

Well, for one, I offer a way to explore the topic with a website devoted to FDI betwwen the US and China. Tyler's posts make me think about new aspects of the economy, which me leads to in depth research, compared to economics by twitter.

I suppose, my conclusion is the US seems hostile to investment, real investment, like actually building capital.

Monopoly rent seeking is favored by Wall Street in the US.

Just read a story on off shore wind, quoting:

"On December 14, for example, a new round of bidding for wind development off the coast of Massachusetts netted a record-setting total of $400 million.

As reported by Reuters, the three winners were Equinor Wind US LLC (Equinor is the new name for Norway’s Statoil), Mayflower Wind Energy LLC (a joint venture between Shell and Portugal’s EDP), and Vineyard Wind LLC (another joint venture, teaming Copenhagen Infrastructure Partners with Avangrid, which is under Spain’s Iberdrola SA).

Then there’s that re-sale from US Wind to EDF Renewables North America, which is a subsidiary of France-based EDF."

That was prefaced by the long delays in getting to these lease sales.

But i would not be surprised if Trump et al bankrupts them all with endless delays like the heavily Koch funded obstruction of Cape Wind. A thousand plus years of off shore energy production will be far more valuable than 20 yeears of possible oil and gas from the same lease area.

CleanTechnica: How New Jersey (Almost) Missed The Boat On Offshore Wind.
https://cleantechnica.com/2018/12/22/how-new-jersey-almost-missed-the-boat-on-offshore-wind/

Add in the near refusal of US investors to put money in public infrastructure. Ie, the toll leases in Indiana, Chicago, Texas, and in airports, are generally FDI, not funded by US interests.

Again, politicians often block them, or hinder them, eg Dubai Ports.

Obvious follow-up question: is China investing elsewhere, or is it decreasing foreign investment overall?

If you want that to be boosted just require production to be in the USA and require a joint venture partner. That is what China did.

Current account==capital account

I guess maybe the trade war, while terrible, is at least working on that level?

There is no hope of domestic growth, progress and innovation in China as long as its children are all being raised and nurtured by their grandparents.

My assessment is China is exceeding the US from 1940-1970 on your metrics.

The US led globally in rail road investment and innovation from 1850 to 1930. Parts of Europe and Japan from 1970 to 2000. Since 2000, its China. China separated its passenger rail from frieght to speed both. The US favored freight and discarded passenger. Europe favored passenger and discard frieght (its historic water transport has been improved, but China has also improved its older very substantial water transport system)

China dominates in large scale clean room production of all sorts. Asian tech firms partner heavily in China ignoring political conflicts, eg Korea vs China, Taiwan vs China.

China might be inferior to US industial central planner circa 1940-1960, but the ability to massively change course and make huge investment is strong. Wind and solar projects get done quickly at huge scale, then wait for power lines. But Texas shale production has exceeded pipeline build rate in a very friendly place for pipelines or powerlines.

China has built up auto manufacturing rapidly on large scale. It produces more vehicles for local use than the US by a factor of two, and increases vehicles on the road by 5x in a decade, which can continue for some time because its still at 1/7 or 1/6 US per capital. (China is going from a massive bike, motor scooter including electric production to cars/trucks as the US did from 1920 to 1950. Its this existing capacity that is fueling the bike/scooter rental growth, the bicycle industry needs to innovate to keep factories busy as cars become more common.)

Of course, before 1940, grandparents were heavily involved in raising kids in the US. It was the war and post war growth the split up grandparent, parents, and kids. My grandmother saw her grandkids weekly unless they (were) moved out of Maine, like my dad did over her objections.

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