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The total market value between the US and China’s direct investment and deals for venture capital fell to the lowest in nine years with the shock of the pandemic and growing tension of the two countries. Rhodium Group, a research and consulting firm, stated in a report on Thursday that the $10.9 billion deals from January to June period was the lowest since the second half of 2011.
Both parties played a crucial part in this change, where China sought to limit capital outflows. At the same time, US President Donald Trump – who aims for his re-election in this upcoming November election – increased scrutiny regarding Chinese purchases on American assets. As stated in Rhodium’s analysis, the total Chinese divestitures in the US surged to $76 billion in the last 20 years.
The latest signal of this haggling change in the US-China deal is the TikTok, as companies may choose to seek to sell their cross-border holdings, rather than transacting with each other. On Friday morning, the US Commerce Department recently announced that it would ban the downloading Chinese-owned social apps WeChat and TikTok in the US on Sunday.
This move was the enforcement of President Donald Trump’s executive order from August 6, giving ByteDance, TikTok’s parent company, 45 days to sell its US assets to an American company or face a ban in the country.
With the rejection of Microsoft’s bid, the administration is expecting TikTok to grant its global operations publicly on a US stock exchange, with retail giant Walmart and US company software Oracle to take stakes before the ban on providing internet and cloud services for the app on November 12.
Chinese investment in the US would have descended if not for the $3.4 billion minority stake of Tencent in Universal Music. Due to the technology giant’s purchase, Chinese businesses’ direct investment to the US reached $4.7 billion in the first half of the year, compared to $3.4 billion a year ago. Meanwhile, the US direct investment to China fell 31% to $4.1 billion.
On the other hand, Chinese authorities are also tightening inward flows, as stated by a separate report by Rhodium Group released this week. A quarterly review of China’s economic reform progress called “The China Dashboard” implied that during the first three months of 2020, regulators “disproportionally targeted foreign firms in their merger reviews.”
However, the American and European business associations affirmed that they generally remain keen on China’s transactions to access giant domestic markets, like China’s agriculture and food sector. This industry became a new popular sector for US investment this year, making many significant deals between American and Chinese companies remain on track.