China's direct investment in the United States has dropped sharply in recent years.
Rhodium Group, a New York-based research service, reports that direct investment dropped by 80 percent from 2016 to 2018.
The biggest drop came in real estate holdings and hotels. Chinese investors seem no longer in a hurry to buy major properties in cities such as New York, Chicago, San Francisco and Los Angeles.
Chinese real estate investment in the United States rose 200 percent from 2015 to 2016, when it reached $16.5 billion. Then, it stopped expanding. During 2018, not a single Chinese real estate or hotel investment reached more than $100 million, the Rhodium Group found.
Oceanwide Holdings, a Chinese company, is putting up buildings on prime properties in San Francisco and Los Angeles. Work reportedly has stopped on one of the towers at the San Francisco Oceanwide Center. Work also has stopped at the Los Angeles Oceanwide Plaza.
“The skylines are no longer filled with cranes, really supplied by Chinese investments coming over here in the downtown,” said Stephen Cheung, president of the World Trade Center in Los Angeles. He also is executive vice president of the Los Angeles County Economic Development Corporation.
“What we're worried about [is] the construction that's already here that cannot be finished because of the financing situations,” Cheung said.
Construction work stalled
The billion-dollar Oceanwide Plaza is being built on land near the Los Angeles convention center and the place where the Los Angeles Lakers and Clippers play basketball. Construction stopped in January for the Plaza’s apartment housing, hotel and shopping center. Cheung said he has seen very little activity since then.
The unfinished building at Oceanwide Plaza is just one sign of a sharp drop in investment money from China.
Overall, direct foreign investment between the two countries set a record in 2016 of $60 billion, the Rhodium Group reported.
One reason for the drop in investment money is a change in China’s monetary policy.
“There were the currency controls out of China…I think it was probably to get money out of China into a safe investment. (But) the Chinese cracked down,” said Dale Goldsmith. He is a managing partner at the law offices of Armbruster Goldsmith & Delvac LLP.
“The Chinese companies couldn't get the money out of China… so certain projects here we've seen (stop),” Cheung said.
Chinese investment had also fallen because of questions being asked by a federal watchdog organization, the Committee on Foreign Investment in the United States. The Rhodium Group estimates the committee's investigation has led Chinese investors to walk away from more than $2.5 billion in U. S. deals.
The relatively strong U.S. economy is another reason for China’s declining investment.
“The dollar has been very strong,” said Goldsmith, noting that a strong dollar makes investing in the United States less appealing to the Chinese. He added that the rising costs of U.S. building projects also hurt.
In addition, there is no sign the trade war between the two countries will end soon. As a result, Chinese companies are not sure whether they should enter the U.S. market, Cheung added.
Southeast Asia gains
The trade war has created a new market. To avoid high tariffs, international companies are moving manufacturing out of China. They are going to places like Vietnam.
In Los Angeles, Cheung noted he is seeing increased interest from Southeast Asian countries. Vietnam is now looking very carefully into Los Angeles because it has such a large Vietnamese population, Cheung said.
"We're also working with our partners in Singapore and Indonesia and Thailand to really expand those opportunities, because we have been dependent on China for such a long time,” he added.
So long as economic tensions remain high between China and the United States, Los Angeles and other U.S. cities will have to look elsewhere for investments.
I’m Susan Shand.
VOA’s Elizabeth Lee reported this story. Susan Shand adapted it for Learning English. George Grow was the editor.
Words In This Story
real estate – n. properties made up of buildings or land
crane - n. a large machine that builders use to move heavy equipment
construction–n. the building of something such as a large structure
crane– n. a tall machine used for moving heavy objects
currency– n. the money of a country
watchdog– n. a person or organization that makes sure that companies or government officials are not doing anything illegal or wrong