Photographer: Alex Flynn/Bloomberg
economics

Trade War Makes the U.S. a Much Riskier Investment for China

Trade War Makes the U.S. a Much Riskier Investment for China

Photographer: Alex Flynn/Bloomberg

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Investing in the U.S. has become riskier for Chinese companies due to the trade war and that won’t improve even if a deal is reached, according to a state-run think tank.

The U.S. was listed as the 14th safest destination for investing in a report from the Chinese Academy of Social Sciences, down from 4th a year ago. That drop was because the U.S. scored the lowest of any of the 57 nations in the analysis for "relations with China."

The researchers also considered economic fundamentals, political risk, debt servicing capability and "social flexibility," which includes factors such as labor mobility. The U.S. scored the highest on economic fundamentals.

Chinese investment in the U.S. collapsed last year as China pulled back on FDI, economic relations deteriorated and the U.S. increased scrutiny of deals from China.

"Even if China and the U.S. compromise in the trade negotiations and reach a deal, outbound investment towards the U.S. has been battered" and will not rebound even if trade does, said Zhang Ming, the lead researcher of the report and the director of international investment research at CASS. "There is no space for optimism" on such investment, he told reporters.

An "unsettling" factor is that the European Union seems to have adopted some measures taken by the U.S. in reviewing foreign investment, said Pan Yuanyuan, a co-researcher of the report. The EU approved the first bloc-wide rules to screen foreign investments from outside the bloc.

— With assistance by Xiaoqing Pi, and Qizi Sun