China moves to curb US investments, raising stakes in trade tensions

China has moved to restrict domestic firms from investing in the US, potentially to gain leverage in future trade talks.

Officials at the National Development and Reform Commission (NDRC), the country’s top economic planning agency, have been instructed in recent weeks to withhold registration and approval for firms seeking to invest in the US, the sources said, Caliber.Az reports per foreign media.

While China has previously imposed restrictions on certain overseas investments over national security and capital outflow concerns, the latest measures highlight growing tensions between the world’s two largest economies as Donald Trump intensifies tariffs.

China’s outbound investment into the US totalled $6.9 billion in 2023, according to the most recent figures. There is no indication that existing Chinese business commitments in the US or holdings in financial products, such as US Treasuries, will be affected, the sources added. However, it remains unclear what prompted the NDRC’s suspension of approvals or how long it will last. Both the NDRC and the Ministry of Commerce, responsible for initial approvals on foreign investments, declined to comment.

Markets reacted swiftly to the news, with US equity futures falling to session lows and European stocks extending losses. The timing coincides with Trump’s anticipated announcement of so-called reciprocal tariffs on Wednesday, expected to target China among other trading partners. In February, the former US president issued a directive instructing a key government panel to curb Chinese investments in strategic American sectors, including technology and energy.

China has already tightened scrutiny on outbound investments following record capital outflows that put pressure on the yuan, Bloomberg reported earlier this year. While the latest restrictions primarily target corporate investments into the US, they add uncertainty for firms attempting to shift production overseas to bypass trade barriers amid an escalating global standoff.

One company caught in the crossfire is Hong Kong-based CK Hutchison Holdings Ltd. Last month, the conglomerate agreed to sell 43 ports—including two in Panama—to a BlackRock Inc.-led consortium for $19 billion. The deal sparked backlash in Beijing, with Chinese authorities reportedly instructing state-owned firms to freeze new collaborations with businesses linked to billionaire Li Ka-shing, Bloomberg reported last week.

China’s Ministry of Commerce data showed that while overall outbound investment grew by 8.7% in 2023, flows into the US fell by 5.2%. By the end of the year, Chinese investments in the US accounted for just 2.8% of the country’s total foreign investment stock.

Chinese firms seeking to invest abroad must navigate a complex regulatory process involving the Ministry of Commerce, the NDRC, and the State Administration of Foreign Exchange. With Beijing tightening control over capital outflows, businesses looking to expand overseas may face greater obstacles in the months ahead.

By Aghakazim Guliyev