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| American Enterprise Institute
China’s investment around the world in 2017 was dominated by talk of restrictions applied by the central government and host governments, such as the United States. The obvious implication, supported by misleading official statistics, was that China’s global spending had plunged. This is wrong. The best available evidence indicates Chinese investment overseas climbed modestly in 2017, after a path-breaking 2016.
The China Global Investment Tracker (CGIT) from the American Enterprise Institute is the only fully public record of China’s outbound investment and construction.1 Rather than merely asserting totals, the CGIT lists all 2,700 transactions. The CGIT shows investment rising almost 9 percent in 2017. This heavily depended on the $43 billion acquisition of Swiss agro-tech giant Syngenta, without which investment would have dropped more than 16 percent. For perspective, the 2017 total without Syngenta would still be the second-highest on record.
It is true that the top line is more bullish than what is below it. The number of transactions fell, as did investment volume in many countries and sectors. But the numbers make clear that the over‑arching story is not decline but change to very large transactions by state-owned enterprises (SOEs) and new sectors of emphasis, such as logistics. Such purchases lead to a banner 2017 for Britain and Singapore, as examples.
Chinese investment is often conflated with its overseas construction of rail lines, ports, and so forth. While construction activity is valuable, it does not bring ownership as investment does. Construction contracts are smaller on average, but there have been more $100 million construction contracts since 2005 than $100 million investments. Last year alone, the People’s Republic of China (PRC) signed construction deals worth $100 million or more with almost 60 countries. This is the core of the much-discussed Belt and Road Initiative (BRI).2 By sector, the most activity occurred in transportation.
Construction under the BRI should be similar in 2018. The main questions for this year are whether Beijing will allow private firms to invest more aggressively and how far Washington will go in blocking Chinese acquisitions. By the end of 2017, private Chinese investment began to pick up again. It will not be allowed to return to the 2016 frenzy but will probably grow this year, helping offset any decline in state spending.
The downside risk for Chinese spending is in the Committee on Foreign Investment in the United States (CFIUS). CFIUS has refused to approve a number of Chinese transactions in a timely manner. Along with PRC restrictions, this undermined 2017 Chinese spending in the US, which fell by half to below $25 billion. A bipartisan bill to extend CFIUS’ authority is being watched globally. Just as important, CFIUS has stalled Chinese acquisitions involving customer data. This embodies a difficult trade-off: the evident benefits of foreign investment versus the lack of rule of law in the PRC. Chinese spending here is positive for our economy. But Chinese firms cannot be trusted to obey American laws.
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