Pre- and Post-pandemic Sino-US Inbound and Outbound Investments

Chinese FDI and VC investments in the US have increased mainly since 2011, and to a lesser extent were opposite capital flows from the US to China. As a consequence of geopolitical tensions and pandemic-related disruptions the Sino-US technology-related FDIs have declined sharply since 2017. It is also remarkable that more recently, Chinese investments in the US have declined, while US investments in China have remained relatively stable over the past decade. Chinese authorities have favored attracting foreign high-tech and knowledge-based service companies willing to serve and compete in the domestic market at the expense of the manufacturers and exporters that traditionally dominate foreign direct investment in the country. A major obstacle remains China's restrictive foreign investment policy, driven by the authorities' renewed focus on domestic social stability and self-sufficiency. Despite trade surpluses and significant increases in capital inflows since 2020, Beijing has not significantly eased its tight line on capital outflows from households and private companies. Most outflows are facilitated by state-owned banks, while total outward foreign direct investment has stagnated since 2017. Since 2021, China's regulatory approach to specific sectors, such as the crackdown on domestic tech giants, has also impacted these companies' outward investment. However, there is still scope for a resurgence of Chinese FDI in the US due to the Biden administration's new “Build Back Better” infrastructure program with a more predictable regulatory approach.