The outflow of Chinese investments from the United States is a result of financial tensions between countries
Financial analysts report that after record-breaking injections into American IT companies in 2018, China has now begun to drain investment. All because of the tense relations between the two countries, caused by the policy of Trump. It deprives China of access to strategic developments of the United States.
What are the reasons for the outflow of investments?
At last year end, IT startups in the United States received more than $ 3 billion in Chinese investments. Such activity was due to the fact that in August 2018, America introduced new rules for regulating financial partnership. They are based on the Congress’s right to restrict and even ban foreign investments in local companies. Because of this, Chinese venture capital investors have stopped investing in the technological market of the United States.
On the other hand, American startups refuse money from China. This follows from the report of analysts. It provides the example of Volley Labs, which in 2018 rejected the new proposal of the Chinese, although it had previously received funds from TAL Education Group from Beijing.
The insider to the Reuters publication also reported that a number of transactions had failed due to the necessary approval from the Committee on Foreign Investment in the United States (CFIUS). Under conditions of confrontations of countries, it was impossible to get it.
By the way, about the committee. After the adoption of new laws, its powers have expanded, and now the regulatory body has access to the analysis of transactions of foreign investors who would like to purchase shares of US companies. The committee also assesses the risks of foreign investments for US national security.
Before the American authorities turned down the flow of infusion of Chinese money, local businessmen and companies invested in developments that were important for competitiveness and the US military potential. In addition, investors supported innovative startups from the field of robotics, speech recognition, creators of unmanned aerial vehicles, as well as services Uber and Lyft.
Will the outflow of Chinese money affect American companies?
Given that in 2017, startups in the United States received about $ 84 billion from global investors, the outflow of investments from China is unlikely to have a tangible impact on the attractiveness of companies. However, increasing tensions between China and America could have negative consequences for both countries in the long-term.
Meanwhile, Washington also banned Chinese investments. In March 2018, US President Donald Trump vetoed Broadcom (Singapore) proposal in the amount $ 117 billion to acquire Qualcomm (America). CFIUS’s conclusion was as the argument whereby this deal could diminish America’s advantages in the field of the wireless technology.
