Vanishing Act: The Shrinking Footprint of Chinese Companies in the US

The United States is experiencing a post-pandemic boom in foreign direct investment (FDI), driven by the resilience of the US economy as well as new industrial policies that incentivize US manufacturing investment such as the CHIPS Act and the Inflation Reduction Act (IRA). Chinese companies are notably missing from the party. This note uses a proprietary Rhodium dataset as well as new US government data to analyze the latest patterns of China’s FDI in the US. The findings are:

• New investment has slowed to a trickle: Both official and alternative data show a sustained slowdown of Chinese FDI in the US since 2017. Annual investment has dropped from $46 billion in 2016 to less than $5 billion in 2022. In the past seven years, China has gone from one of the top five US investors to a second-tier player surpassed by countries such as Qatar, Spain, and Norway.  
• The US footprint of Chinese firms is shrinking: Not only has investment slowed, but assets, revenues, and employment at Chinese companies in the US have all declined in recent years. The retrenchment is more severe and prolonged than the temporary slowdown in business that other multinational corporations (MNCs) experienced during the pandemic, suggesting that the retreat of Chinese companies from the US market was driven by restrictive economic policies fueling US-China economic decoupling over the past five years.
• Declining local job creation is further undermining political support for US-China economic engagement: As the prospects of Chinese firms serving as major local employers in the US dwindle, fewer local officials and businesses are willing to stand up against more restrictive US economic and national security policies towards China.
• The retreat of Chinese firms from the US illustrates risks of fragmentation and political misalignment: Chinese FDI has remained more resilient in other markets, reflecting a lower degree of regulatory and political scrutiny. The divergence of Chinese FDI trajectories across the OECD—especially in high-growth sectors like electric vehicles—illustrates the risks of fragmented global value chains as well as misalignment of policy priorities between the US and important allied nations.