China pauses US-bound company investment amid trade war
Restrictions have been in place since April with no clear end
NEW YORK -- China has stopped approving outbound investments for companies looking to set up or expand operations in the U.S., amid trade negotiations between the world's two largest economies, Nikkei Asia has learned.
Local Chinese governments and the state economic planner, the National Development and Reform Commission, have ceased such approvals since April, according to people familiar with the matter.
Chinese overseas investment previously has been subject to restrictions over concerns about capital outflow and sectors that Beijing considers sensitive, such as weapons manufacturing. But the latest curb comes at a time when relations are fraught as U.S. President Donald Trump imposes sweeping tariffs to bring manufacturing back to the states.
Companies with outbound investments below $300 million are required to file with their local government and usually are not subject to national approval. However, provincial governments also have stopped processing applications.
It's unclear how long the restrictions on corporate investment, which include greenfield or acquisitions, to the U.S. will last, the sources said, requesting anonymity due to the sensitivity of the matter.
Companies with investment projects abroad valued above the $300 million threshold are required to file for approval from the NDRC, Commerce Ministry and the State Administration of Foreign Exchange. The NDRC and Ministry of Commerce did not immediately reply to a request for comment.
Several manufacturing projects that were underway in the U.S. have been put on hold, said a consultant who works with Chinese companies to set up overseas.
"For the rest of the world, they're being approved," he said. "There are projects in places that are in progress right now."
The latest restriction came after U.S. President Donald Trump in April imposed a tariff rate of up to 145% on Chinese imports, sparking a trade feud between the two countries that has upended global supply chains.
Blanket tariffs on Chinese goods were lowered to 55% in June, and Beijing loosened export controls on rare earth materials in return after initial negotiations. Chinese and U.S. trade officials met on Monday for a third round of talks, where they agreed to extend a trade truce beyond the Aug. 12 deadline. The decision to prolong will be made by Trump, according to the U.S. trade delegation.
Chinese investors have pulled back from the U.S. in recent years over fraught bilateral relations and increased American scrutiny of Chinese companies on the state and federal level. New Chinese investment into the U.S. peaked in 2016 and faded to $3.2 billion last year, according to New York-based Rhodium Group, which tracks acquisitions, greenfield projects, and expansions by Chinese companies globally.
The latest data from China's Commerce Ministry indicates Chinese investment into the U.S. totaled $6.91 billion in 2023 -- down 5.2% from previous year -- and accounted for 3.9% of total outbound investment.
Armand Meyer, senior research analyst at Rhodium Group's China Data Services team, said though the restrictions represent an escalation in the trade conflict between the two governments, they are unlikely to have an effect on foreign investment in the U.S..
"It's mostly about sending your signal," Meyer said. "Because the Chinese investment has already hit a decade low, there will not be significant impact for investment in the U.S."
American duties on Chinese imported goods have encouraged manufacturers to shift production to other Asian countries. But with Washington's sweeping tariff policy on nearly all trade partners, Chinese firms are motivated to move onshore despite political hostility and regulatory restrictions.
Trump in February issued a memorandum instructing the government to further curb Chinese investment on high-tech and strategic sectors.