Chinese Investment in North America Plunges Ahead of US Election

The lead-up to the 2024 U.S. presidential election has been marked by a significant decline in Chinese investment in North America, particularly in the United States. According to new research from US-based consultancy Rhodium Group, companies announced just $191 million of new investments into Canada, Mexico, and the US in the final quarter of 2023, a decline of more than 90% from the same period a year earlier. This was a fraction of the $16.5 billion in outbound investment announced during the final three months of 2022, with the Middle East and Africa being the largest destinations for Chinese firms.

The US has become a more hostile place for Chinese companies, with tariffs limiting or blocking their exports and growing restrictions on investments into the world's largest economy. Case in point: the ban on Chinese electric vehicle technology has led to a capital-light approach to auto-related investment, with battery giant Contemporary Amperex Technology Co Ltd. (CATL) only licensing its technology to Ford Motor Co. for a factory in Michigan. This shift in strategy is a direct result of the U.S. government's restrictions on Chinese technology in the automotive sector.

Minerals, Metals
Globally, foreign investment by Chinese firms continued to be concentrated in the same sectors as before. Almost half went into basic materials, metals, and minerals projects. For the whole year, newly announced investments saw an overall decline of 10% from the previous year, driven by a 70% drop in new car factory projects. Even so, the $58 billion in completed projects marked the highest total since 2020. A surge in renewable equipment and power generation investments also boosted spending in the energy sector to its highest level since 2019, the data showed. Chinese companies dominate global manufacturing of wind turbines and solar panels and have been facing pressure to set up supply chains abroad to avoid tariffs and meet local production requirements.



Greenfield investment was dominant last year, with money going into new projects in oil refineries, mines, and battery factories. China's official data shows that outbound spending is growing rapidly. The Ministry of Commerce tallied a rise to $144 billion in non-financial commitments last year. According to the central bank, Chinese investors sent $173 billion overseas in 2024, the most since 2016. However, the transaction-level data compiled by Rhodium doesn't back up the reported increase. The divergence between firm-level data and the official national statistics has been widening since 2019, according to the consultancy. The official data likely reflects financial flows and money being classified as direct investment so it can leave the country, wrote Rhodium analysts including Thilo Hanemann. The implication is that "a significant portion" of China's outward foreign direct investment "does not represent genuine outbound FDI in global real economy operations," they said.

In conclusion, the decline in Chinese investment in North America, particularly in the U.S., leading up to the 2024 U.S. presidential election can be attributed to several factors, including U.S. regulatory hurdles, political climate changes, and a shift in investment focus. Despite the overall decline, certain sectors and industries, such as metals and minerals, remained concentrated due to their strategic importance and long-term potential. As the global economy transitions towards a low-carbon future, the demand for metals and minerals used in renewable energy technologies is expected to increase significantly, making these sectors an attractive target for Chinese investment.