HONG KONG/NEW YORK (Reuters) – President Donald Trump raised barriers for Chinese companies seeking to invest or raise money in the United States that will have a lasting impact even if he does not win a second term, according to dealmakers and policy experts.
FILE PHOTO: Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019. REUTERS/Aly Song
Chinese acquisitions of U.S. companies dropped to $1.86 billion last year, a tiny fraction of the $61 billion they totaled in 2016, when they were at their peak right before Trump came into office, according to Refinitiv data.
Chinese venture capital investments into the United States, which peaked in 2016 at nearly $15.7 billion, totaled just $6.7 billion as of Oct. 27, according to PitchBook data.
Foreign direct investment from China into the United States has declined by 90% to $4.7 billion so far this year compared to 2016, according to the Rhodium Group.
Much of this is the result of Trump’s policies. The United States blocked many Chinese acquisitions, especially of U.S. technology firms, on national security grounds, and even ordered some Chinese firms such as the owners of social media apps TikTok and Grindr to divest them. U.S. stock exchanges raised their listing standards after many investors got burnt in auditing scandals involving Chinese firms, including coffee chain operator Luckin Coffee. And Chinese nationals found it harder to secure U.S. work permits.
This trend could continue, even if China-U.S. tensions over hot-button issues such as trade and the future of Hong Kong eased, dealmakers say. This is because concerns about corporate China abusing its technologic prowess and misleading investors are shared by both Republican and Democratic U.S. lawmakers.
“The United States no longer views China as a partner, but an enemy and a threat… America has become very unfriendly soil to anything Chinese,” said Fred Hu, chairman of Chinese private equity firm Primavera Capital Group, which has investments in U.S. companies. He added that U.S.-China relations were unlikely to improve in the short term.
Under Trump, the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security risks, toughened its stance on Chinese companies.
CFIUS reviews are confidential, and the secretive government panel does not disclose how many deals it blocks each year. But in its annual reports to the U.S. Congress, CFIUS has revealed its heightened scrutiny of Chinese deals; it reviewed 140 deal applications by Chinese acquirers in the first three years of the Trump administration, more than those from any other country, compared to 20 such applications in the first three years of Barack Obama’s administration. This is despite Chinese applications with CFIUS for U.S. deals declining from 60 in 2017 to 25 in 2019.
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Among the deals that CFIUS blocked under Trump were Chinese financial technology giant Ant Group’s $1.2 billion acquisition of U.S. money transfer company MoneyGram International Inc MGI.O and China-based semiconductor investment fund Unic Capital Management’s $580 million acquisition of U.S. semiconductor testing equipment company Xcerra Corp. Some Chinese acquirers also abandoned their U.S. acquisitions before CFIUS blocked them.
“CFIUS has brought great changes for Chinese firms’ overseas acquisitions, in the tech sector especially,” said Peter Kuo, a partner in China-backed private equity fund Canyon Bridge, whose attempted $1.3 billion acquisition of U.S. chip maker Lattice Semiconductor Corp LSCC.O was thwarted by CFIUS in 2017. The fund is now focused on investing in Chinese companies.
The U.S. crackdown spilled over into venture capital investments. Many Chinese venture funds and some state-backed ones, who flooded into Silicon Valley several years ago in the search for reasonably valued unicorns, left the U.S. in the last couple years, as CFIUS also scrutinized sizeable minority stake investments. Some Chinese investors into U.S. venture capital firms also retreated.
“Now we have zero Chinese investors in our fund,” said Edith Yeung, general partner of Silicon Valley-based venture capital fund RaceCapital. She said she had to reject many Chinese investors from her fund due to the regulatory risk.
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Trump said this year he was also looking “very strongly” at the possibility of delisting Chinese companies that do not comply with U.S. accounting standards from U.S. exchanges, but did not follow through on that threat.
While the total value of Chinese companies listing in New York has reached $2.5 trillion so far this year – almost double the total four years ago before Trump came into office – Nasdaq has updated its rules to make it more difficult for small Chinese firms to float on their exchanges.
As a result, only five Chinese IPOs under $25 million landed in New York this year, compared to nine last year.
Policy experts said deep U.S. suspicion of China’s economic power, technological advances and accounting standards will likely result in many of the hurdles to cross-border investments remaining in place even if Trump’s Democratic challenger Joe Biden succeeds him in January.
“Our take is that the U.S. containment on China is bipartisan,” Natixis economists wrote in a note last week.
Reporting by Kane Wu in Hong Kong and Echo Wang in New York; Editing by Greg Roumeliotis and Christopher Cushing
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
