Venture capital flows between China and the US surpass direct investment for the first time

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Venture capital flows between the U.S. and China topped completed two-way foreign direct investment for the first time last year, according to a research initiative led by Rhodium Group and the National Committee on U.S.-China Relations.

"In China, American investors continued to utilize minority VC investments in 2018 to gain exposure to sectors that are off limits to full blown foreign takeovers or have powerful informal market entry barriers, for example digital payments, internet startups and other digital content," the authors said.

Increased scrutiny from both governments on such cross-border investments, and Beijing's efforts to stem capital outflows and debt buildup by some major conglomerates contributed to the drop. Key deals in U.S. foreign direct investment into China's real estate sector, which more than doubled to over $3 billion in 2018Warburg Pincus formed a $1 billion joint venture with Hande Group to pursue "special situations investments" in distressed Chinese real estate projects.The researchers said they have a "positive" near-term outlook for U.S. foreign direct investment in China based on expected flow of deals.

 

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