HONG KONG (Reuters) – U.S. corporate acquisitions in China collapsed to their lowest level for 14 years in the first half of this year, as trade tensions between the two countries and uncertainty about Chinese government regulations took a toll on deal making.
The value of mergers and acquisitions involving American companies in China dropped 32 percent to just $523 million in the six months to June 30 from $771 million in the same period last year, and were down 87 percent from $4 billion in the first six months of 2015, according to Thomson Reuters data.
Bankers and lawyers involved in deal making say that increasing signs of trade friction between Washington and Beijing are acting as a deterrent. The tensions were reflected at a meeting earlier this month when officials from the two countries failed to agree on major new steps to reduce the U.S. trade deficit with China.
American companies do not want to make acquisitions in an environment where they could get caught in crossfire between the two governments, these sources said. That could happen if, for example, U.S. President Donald Trump’s administration imposed punitive tariffs on Chinese steel and other products and Beijing retaliated with its own action against American goods or entities.
That in turn leads to the danger that American companies won’t be able to take full advantage of China’s still buoyant economic growth of just under 7 percent a year, adding further to the stresses in the trade and investment relationship between the two countries.
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