U.S.-China long-term investment falls to 9-year low amid pandemic, protectionism
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Factory builds and other long-term investments between China and the United States declined to $10.9 billion in the first half of 2020, the lowest level in nine years, according to a report from the Rhodium Group economic research firm and the National Committee on U.S.-China Relations, which advocates for bilateral ties.
One key finding from the authors: The Trump administration’s tariffs against Chinese imports, designed to make manufacturing more expensive on the mainland and bring factory jobs back to the United States, has not succeeded.
“The tariffs failed,” Stephen Orlins, president of the U.S.-China committee, said. “They succeeded in some relocation of production from China to other lower tariff countries: Vietnam, Malaysia, Indonesia, Sri Lanka. But it did not bring manufacturing back to the U.S.”
Chinese investment in the U.S. also fell because of the pandemic recession, as well as American protectionist policies against Chinese firms including TikTok, the report said. Those measures have pressured Beijing to retaliate against foreign companies and investors in China, said Rhodium Group partner Thilo Hanemann.
“Foreign companies may be hesitant to further deepen their footprint inside of China,” Hanemann said. “They might diversify away from their Chinese manufacturing bases over the next couple of years.”
Political frictions may apply to strategically important sectors, like semiconductors, but Hanemann expects U.S.-China investment to continue in other areas, including KFC’s inroads into the mainland market.
Continued investments matter in the big picture, he added.
“We know from history that two-way trade and investment and integration decreases the risk of conflict,” Hanemann said. “If China really is isolated as a country, one of the biggest risks for all of us will be higher risk of a serious military confrontation.”
COVID-19 Economy FAQs
What’s the outlook for vaccine supply?
Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.
How has the pandemic changed scientific research?
Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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