Foreign Direct Investment from China into the United States shrunk for the second year in a row.

According to the new data by the Rhodium Group, in 2018 Chinese FDI in the United States fell to just $4.8 billion — a massive decline from $29 billion in 2017 and $46 billion in 2016.

The figure of 2018 released by the independent group is a 90 percent decline from 2016 and the lowest level in FDI by China into the United States since 2011.

The report of the decline comes in between the on-going trade war between the two countries. China has been allegedly asking its companies to reduce their global holding and stocks so that it can reduce its debt level.

According to the same data, almost $13 billion worth of assets were sold in 2018 by China in the United States. China bought much of these assets in the 2015⎯2016 investment booms. Chinese net direct investment into the United States saw a decline of $8 billion in 2018, including those divestitures.

The group also added that there is also a $20 billion worth of divestitures that is still pending.

In recent months since the tariff war started between the two economies, Chinese companies have started selling assets. Anbang has already put up a number of its U.S. luxury hotels for sale, HNA Group has also allotted billions of dollars’ worth of assets for sale, Fosun International is willing to sell a stake in its New York property, 28 Liberty, and Dalian Wanda Group is looking for buyers for a sale of its stake in Legendary Entertainment.

Though Foreign Direct Investment from China into the United States fell, venture capital funding from Chinese resources into the United States has gained a record high of $3.1 billion, the Rhodium group said.

The National Association of Realtors data shows that amidst the contracting Foreign Direct Investment, Chinese investors are still on the top in buying residential housing in the United States both in terms of units and value. This shows the growing interest among the Chinese middle class in the American market.

The official economic data released in Germany has said that there was weak growth in 2018 and has just managed to avoid a recession. Germany’s economy is the largest in Europe, and this slowdown has brought an end to the boom they saw in the past decade. As per the data released by the federal statistics, there was a reduction in growth from 2.2 % which was reported in the last two years to 1.5 % in 2018. In terms of GDP for 2018, it was €40,900 per person or €3.4 trillion. There was slight cheer at the end of the year when there were signs of recovery and dodging recession by a blink after having two-quarters of a dip in the output. The growing concern is that the slowdown is longer than what was anticipated and is not a temporary deviation anymore.

Possible Reasons for this Setback:

• The government and a few experts say the reason for this economic state is due to a few ‘one-off’ factors which will probably be rectified in the coming year.
• Low levels of water in the Rhine due to drought which affected raw materials shipping and chemical shipments.
• Trouble in the auto manufacturing sector due to bottlenecks in production. The companies have to adhere to new emission standards set by the European Union which impacted production and sales.
• Brexit impacted Germany as trade suffered.
• US President Trump’s trade war with China and Brussels impacted exports.

A Silver Lining in the Gloomy Economy

The silver lining in all this economic gloom in Germany is that the consumer spending is good as the unemployment levels are at a historical low and the domestic fundamentals are strong.

Though economists are optimistic, lack of new structural reforms, lack of investment in infrastructures like airlines, railway, and digital technologies can hugely impact the economy and push it down further.

Many European countries like Italy are also in recession, and the going is getting tougher as the Eurozone as a whole is reeling from a decrease in demand for services and goods in 2018. That has made many forecasters alter their projections and predict a lower growth year on year. Moreover, there are many political concerns which have dented the consumer and business confidence which has resulted in less production. Also unless these concerns are addressed quickly even increased domestic spending will not be able to offset the impact of slow exports.

The United Kingdom’s economy has slowed down in the last three months and at the lowest in November. And it is the weakest in the past six months. The UK Office for National Statistics (ONS) said the economy grew by 0.3 percent during this period and it is 0.4 percent less than the growth of the last three months.

As per the ONS, due to weakened overseas demand, the manufacturers have suffered falls in output for the longest period. As per the statistics, the economy grew by 0.2 percent in November, and it is up from 0.1 percent in October.

Decline-

As per Rob Kent-Smith, head of national accounts at the ONS, the growth in the UK continued to slow from November after performing way better in the middle of the year. Accountancy and housing sector grew by large numbers, but many other sectors saw a sluggish growth.

Manufacturing also saw a poor growth as the car production and pharmaceutical industry performed poorly.

Month on month, construction growth was at 0.6% in November. Manufacturing contracted by 0.3%, while services activity rose at 0.3%. Production as a whole contracted to 0.4%.

Lot many global situations like the trade war between the United States and China and the tumbling growth of the global economy also had spill-over effects on the UK economy.

The case is not limited to the UK only, but figures from Germany and France also showed a similar trend.

The ONS also said the UK economy was returning to moderate growth after growth volatility earlier in 2018.

The uncertainty over the Brexit finalization also has a large impact on the sentiments of the people on spending pattern. Not only the domestic demand but also the demand from the trade partners are also declining.

Another data showed that once erratic items like aircraft orders were stripped out, the divergence between imports and exports – the trade deficit – widened to £9.5bn in the three months to November.

Big brands like JLR, Apple are also facing the crunch in demand owing to the slower global growth and less demand from China. Now it has become evident that large economies like the UK should not depend on specific partners rather than diversifying the consumer base countries.

Along with all these global woes, Brexit headwind is also creating many hurdles for the UK businesses. So, to put the economy again on track, UK should first clear the problems at home by finalizing details about Brexit. Then it should think the ways to tackle the global pressure.