Chinese Foreign Direct Investment in U.S. Reaches Record High, IMF Downgrades Global Growth
April 12, 2016
American import prices rose 0.2% in March, reflecting a rebound in oil prices, while export prices were unchanged; International Monetary Fund (IMF) revised April projection for global growth during 2016 downward, identifying Britain’s referendum vote to leave the European Union and China’s industrial overcapacity as two primary risks to global economy; Chinese foreign direct investment (FDI) in the U.S. reached a record high of $15 billion in 2015, according to a recent report by the National Committee on U.S.-China Relations and the Rhodium Group.
Economic Indicators & News
- American import prices rose 0.2% in March, reflecting a rebound in oil prices, while export prices were unchanged. Petroleum prices were up 6.5% on the month, though import prices excluding petroleum fell 0.1% for the twenty-third month of consecutive declines in the metric. Weakness in emerging market currencies and quantitative easing in the Eurozone and Japan have maintained the intensity of deflationary cross-border price pressures, as consumer goods, food products, and capital goods all experienced declines. Prices for exported industrial supplies were up 0.7%, but those for agricultural goods were down 2.5%. On the year, import prices have fallen 6.2% while export prices moved lower by 6.1%. [BLS]
- The International Monetary Fund (IMF) made a downward revision of 0.2% in its April projection for global growth during 2016 as it identified Britain’s June referendum vote to leave the European Union and China’s industrial overcapacity as being the two primary risks to the global economy. The body cut output growth projections for the United Kingdom to 1.9% from 2.2% in the sharpest downgrade for any major advanced economy other than Japan, as trade between the island nation and continental Europe is expected to suffer greatly should the referendum pass. Establishment leaders in the country, including Prime Minister David Cameron, Finance Minister George Osborne, and the mayor of the City of London, oppose the referendum. Meanwhile, the IMF heightened its uncertainty regarding the ability of the Chinese government to accept a scenario in which supply-side reforms will maintain lower, albeit still rapid, increases to annual output. The organization also lowered GDP growth projections for the U.S. by 0.2% to 2.4% this year. The April revision now forecasts world output to expand by 3.2% in 2016 and 3.5% in 2017. [IMF]
- Chinese foreign direct investment (FDI) in the U.S. reached a record high of $15 billion in 2015, according to a recent report by the National Committee on U.S.-China Relations and the Rhodium Group. Chinese-affiliated firms acquired domestic companies employing 90,000 Americans in more than 80% of the country’s congressional districts. China has invested very little in the U.S. as compared to Britain and Japan, however, as the country has been focused instead in recent years on infrastructure development in commodity-rich emerging economies in Africa, Latin America, and Southeast Asia. As China shifts focus to accelerated services-sector growth, its firms have become more interested in purchasing brand-name western companies. Notably, Beijing-based Anbang Insurance recently competed against Maryland-headquartered Marriott International in a failed effort for control of Starwood Hotels in a deal that would have been valued at $13.5 billion. Chinese FDI in the U.S. is anticipated to total between $20 billion and $30 billion during 2016, and more than $30 billion in acquisitions are currently pending. [FT]