For all the political tensions about trade, American-based venture capitalists are still pouring money into Chinese start-ups.
Venture capital flows between the U.S. and China hit an estimated $22 billion last year, topping the year's $18 billion in completed two-way foreign direct investment for the first time, according to a report released Wednesday by the U.S.-China Investment Project.
The bulk of the start-up investments came from U.S.-owned firms, which roughly doubled their investments into Chinese companies between 2017 and 2018 to a record $19 billion, the report said.
"In China, American investors continued to utilize minority VC investments in 2018 to gain exposure to sectors that are off limits to full blown foreign takeovers or have powerful informal market entry barriers, for example digital payments, internet startups and other digital content," the authors said.
On the other hand, the research found Chinese foreign direct investment into the U.S. plunged more than 80% to just $5 billion last year, while American flows to China fell about 7% to $13 billion.
Increased scrutiny from both governments on such cross-border investments, and Beijing's efforts to stem capital outflows and debt buildup by some major conglomerates contributed to the drop.
The net effect is that U.S. firms invested more into China last year than the other way around, according to the report. One primary driver was renewed U.S. interest in Chinese real estate, including a search for distressed assets.
Key deals in U.S. foreign direct investment into China's real estate sector, which more than doubled to over $3 billion in 2018
The researchers said they have a "positive" near-term outlook for U.S. foreign direct investment in China based on expected flow of deals. On the other hand, the researchers said Chinese investment appears relatively "depressed" but may be on an upward trend, given a 40% increase to $2.3 billion in the first quarter of this year from the final quarter of last year.
"It should be noted that portfolio investment provides a new bright spot in the two-way investment relationship," Stephen A. Orlins, president of the National Committee on U.S.-China Relations, wrote in a foreword to the report. "The high volume of flows in 2018 sends a clear signal that the commercial appetite for cross-border investment between our countries remains strong."
Source: CNBC
Translated by Jennifer
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