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Chinese investment in U.S. may slow this year

Staff Writer |
Foreign direct investment flow between the world's two largest economies may be lower in 2017 than last year as a result of an expected slowdown in Chinese flows to the United States, according to a report.

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The forecast change comes after their two-way FDI reached a record high of $60 billion in 2016.

But there is "huge room" for expanding FDI flow in both directions, said the annual report jointly prepared by the National Committee on U.S.-China Relations and the Rhodium Group.

In 2016, Chinese FDI in the United States tripled from the previous year to $46 billion; U.S. FDI in China, by contrast, reached $13.8 billion, roughly the same as in 2015, the report said. This year, according to the report, the two-way FDI is unlikely to reach the same levels as last year.

"Our best guess is a moderate increase in U.S. flows to China, but a notable moderation in the other direction due to Chinese capital controls and other short-term factors," wrote Thilo Hanemann, Daniel Rosen and Cassie Gao, co-authors of Two-Way Street: 2017 Update US-China Direct Investment Trends.

Between 1990 and 2016, the cumulative value of U.S. FDI transactions in China exceeded $240 billion, while Chinese companies invested $110 billion in the US, meaning the U.S. corporate footprint in China remains larger than that of Chinese companies in the US.

The report suggested that it would be a good time for the U.S. and China to work together in defining acceptable security-related restrictions to FDI flows, especially as they continue to discuss a bilateral investment treaty.

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