China’s US Investment: A State Of Attraction

With the ‘Phase One’ US-China trade deal due to be signed on January 15, our man in Tokyo alerts us to a timely article in the Nikkei Asian Review. It examines the continuing Chinese investment in US agricultural and manufacturing states that could be considered Trump heartland, despite Washington’s general chilling of inbound direct investment from Chinese firms.

These are ‘Red’ states where the US president was successful during his 2016 election campaign in blaming China for their economic ills, but equally where Beijing’s retaliation to his tariffs on China’s exports have caused the most pain and thus where Trump’s bid for re-election in November risks coming unstuck.

The article highlights a disconnect between attitudes towards China at the federal and state government level. Many state governors, including Republican ones, have pursued inbound Chinese investment on the basis that any jobs, even Chinese-owned ones, are better than none. They have made a pragmatic peace with the Trump administration’s economic hawkishness towards China and its continuing appeal to the president’s electoral base.

The other lessons from the article are that it provides a further example of how difficult decoupling the US and Chinese economies is, and of why domestic US electoral politics weigh heavily in Trump’s trade calculations — as they always have done.

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