
Chinese Money in the U.S. Dries Up as Trade War Drags On - pseudolus
https://www.nytimes.com/2019/07/21/us/politics/china-investment-trade-war.html
======
vikramkr
A lot of the new crop of biotech companies popping up in Philadelphia raised
chinese money - one of the founders there told me it was because chinese
investors had a "more enlightened view of valuations." I wonder how these
changes will begin to affect biotech. Considering some of the recent
intellectual property drama with chinese national employees, could there have
been risks around IP from taking money from Shanghai based venture firms? It's
a complicated issue as international financing always is, but I do wish people
were allowed to invest anywhere/accept money from anywhere without government
interference

~~~
tmcronn
Standard procedure has been: if you want their investment or their business,
you have to surrender your data/IP upon request.

And they probably came to these Biotech companies with a juicy offering of
capital. So expect some Biotech breakthroughs in the near future, but not
necessarily coming from the West.

~~~
opportune
Pretty sure that's only true if you actually set up operations in China. Not
that they might not try to get the IP anyway, but it's definitely not a given.

It makes complete sense for a Chinese investor to want to invest in biotech in
the US and not China, btw. The US is a world leader in biotech and the
American market is... very lucrative in the biotech area as well.

~~~
mdorazio
Nope, it goes for companies setup stateside as well. For example, Faraday
Future, a now-failed electric car startup was headquartered in California, but
had very strong IP transfer methods in place to get technology developed here
back to the China "sister company" also run by the Chinese investors. The same
setup is used at a couple of other China-funded startups I've run into in the
last couple years as well. Basically, if you take Chinese investment money
it's highly likely to come with some very strong strings attached.

~~~
RidingPegasus
I can never understand how people are complaining about this stuff. You
willingly and knowingly sign a contract with the terms stated right there.
Whose fault is that? The Chinese?

If you signed a contract handing over your large profitable company in
exchange for some magic beans who exactly is the bad person here?

Don't sign the contract if you don't agree to the conditions. The real people
to blame for IP transfer don't seem to cop a single mention by most.

~~~
jorblumesea
Given the Western way of doing business, it does come as a shock when China
spins up a complete clone of your business with government money, including IP
and R&D. It's malicious intent. They have no motivation to see the business
succeed.

It's not like it's spelled out in the contract: "we will use free loans from
the Chinese govt to take your tech, undercut your markets and put you out of
business. We have no intentions of letting your business thrive and survive."

We're getting smarter about it but this is way of doing business is very
foreign to the West. The West sees investors as capital assets and not active
market players. When Peter Thiel invests in a company he is not looking to
spin up his own competing clone. He wants the business to succeed. Not so in
China, who has a vested interest in running US businesses into the ground.

~~~
RidingPegasus
Should other countries cede sovereignty and do exactly what others dictate to
them? The West needs be smarter about how to compete and deal with the global
landscape rather than crying about it incessantly and childishly trying to
divert blame. Nothing illegal happened in the examples above, Western CEO's
willingly handed over their property knowing full well what happens. And they
did it to profit.

India flagrantly walks all over IP too. They have a massive export business
stealing new pharmaceuticals and selling generics to the world. This is the
reality of the world.

Either get smarter at how to manage this stuff or give up. The US is hardly in
a position to suddenly want an international arbiter deciding who is playing
fair or not given the history of torn up treaties and general aversion to
international governance.

It's not a game of baseball, countries are free to make their own rules and
decide whether they respect yours or not.

~~~
SkyMarshal
As a Westerner I fully agree with this. US seems to have this conceit that
China, India and other emerging economies will play by the post-WW2 global
trade rules we set up, if we just continue to nudge and pressure them in that
direction. But it's been obvious for a while now their intent is to play by
their own rules. US whinging about something so blatantly obvious,
unsurprising and foreseeable is pretty lame.

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11thEarlOfMar
The reduction in Chinese investment in the US has as much to do with China
policy as it does with the trade war:

[https://www.newsadvance.com/archives/capital-flees-
china/art...](https://www.newsadvance.com/archives/capital-flees-
china/article_a549b28f-4ac7-5e1a-a02a-502a0d06b243.html)

~~~
dgellow
I’m in Germany: 451: Unavailable due to legal reasons

~~~
denysonique
Same in the UK. Thank you eurocrats.

~~~
ashildr
It has nothing to do with eurocrats but with the anal probes media companies
insist to give any visitor.

And it’s a wrong usage of error 451 which will do harm to the concept of
making censorship visible.

Plus it does not even work consistently, I can read the article after
reloading.

~~~
dmix
So why did they do it in the first place? Regardless if they did it wrong they
did it for a reason.

~~~
chmod775
They couldn't be assed to build a not morally compromised version of their
page.

Ads are still possible with GDPR if you forego invasive tracking or obtain
explicit permission.

Arguably ads with tracking is going an extra mile over just displaying some
ads anyways.

~~~
C14L
Invasive tracking is still possible.

What those companies do not want is to invest big money into "advisors" that
help them to be complient with GDPR. A law that was not even made by their own
government.

Complience not only means "get consent". There is a long list of things you
have to do, regardless of who or what you are tracking. And then you still
don't have certainty if you are all legal, because there are so many details
that courts will have to interpret first. And then they may be interpreted
differently in different EU countries (because we all have our own national
version of GDPR!)

So, in conclusion, study this: [https://gdpr.eu/](https://gdpr.eu/) or simply
block users you don't care about anyways.

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ashleyn
I wonder if this will help make housing more affordable due to reduced foreign
investment.

~~~
samsonradu
Considering the "new normal" interest rates around the world and the direction
things are going (down), I have doubts housing prices will decrease in any
developed country for the upcoming 5 years.

~~~
cptskippy
Housing prices in Las Vegas and Southern California are declining. This is a
first time for LV since the Great Recession. Declines like this have
historically preceded every recession.

Do you anticipate housing prices will weather such a recession which many
predict is looming on the horizon? That would be a first.

~~~
cheriot
declining by what magnitude? In Cali it's more like they've been oscillating
around an upward trend.

~~~
cptskippy
We're in preparation to move to SoCal so we've been watching prices for the
last year. The trend has definitely been downward for housing in our price
range.

~~~
scruple
It's flat where I live (south Orange county, California) for homes in the
$500k-$1M mark. Newer development has stickier prices than older homes.
However, there's a lot of local business development happening and, in the
case of a single organization that I am aware of, many high-paying jobs are
moving into the immediate area in the next 18-24 months. That single
organization is stated to be investing over a billion in this new facility
alone. It'll be very interesting to see what this does to the local market.

------
skybrian
The article doesn't talk about what's happening with the trade deficit. It
seems like it would be important to know what's happening there because
Chinese exports to the US are how China (as a whole) earns US money to invest?

Apparently the trade deficit was higher in May in anticipation of tariffs. [1]
Is newer data available?

[1] [https://www.reuters.com/article/us-usa-economy-trade/u-s-
tra...](https://www.reuters.com/article/us-usa-economy-trade/u-s-trade-
deficit-surges-to-five-month-high-as-imports-soar-idUSKCN1TY1PR)

~~~
jjwhitaker
There may be more data, but a trade deficit is not an inherently bad thing in
fact with most nations it strengthens US soft policy by adding US currency and
use of US currency to the local economy.

For China, this means they can buy gold in USD (that has slowed recently but
they usually purchase large amounts of gold regularly) or offer investment
cash in USD (for businesses or housing abroad). How the cash is used could be
negative like buying US housing to hold or rent but a trade deficit is
generally positive for the US.

~~~
skybrian
Yes, it's not inherently bad. My main point is that if Chinese imports to the
US drop, you would expect less Chinese investment in the US.

(But then again, maybe that's nothing compared to all the assets built up from
previous decades of trade deficits.)

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latchkey
Living and traveling around SE Asia, I've seen first hand where Chinese money
is going. Massive amounts of construction (and destruction) in Vietnam,
Cambodia and Laos.

~~~
o-__-o
Everyone hated TPP now we are realizing TPP prevented exactly this by forcing
trade agreements between the East Asian countries including China

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magwa101
Pretty small numbers, looks meaningless, less than a percent, that will likely
be replaced by other sources (EU etc.).

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point78
Sounds like a good thing to me?

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wsfintech
Comprehensive data points on why this is happening. Formulate your own
conclusions.

* "Every Chinese citizen is only allowed to exchange up to US$50,000 in foreign currency a year at their bank, and also faces major hurdles to buying foreign exchange within that quota" [https://www.scmp.com/economy/china-economy/article/3017203/c...](https://www.scmp.com/economy/china-economy/article/3017203/china-should-ease-currency-controls-let-citizens-invest)

* "New Restrictions on High Tech Technology Transfers to China" [https://www.chinalawblog.com/2018/11/new-restrictions-on-hig...](https://www.chinalawblog.com/2018/11/new-restrictions-on-high-tech-technology-transfers-to-china.html)

* "Something Just Broke In China As Repo Rate Soars To 1,000% Overnight" [https://www.zerohedge.com/news/2019-07-19/something-just-bro...](https://www.zerohedge.com/news/2019-07-19/something-just-broke-china-repo-rate-soars-1000-overnight)

* "Transfering money is getting more and more difficult, even perfectly legitimate business transactions." [https://www.reddit.com/r/China/comments/c5qwd7/transfering_m...](https://www.reddit.com/r/China/comments/c5qwd7/transfering_money_is_getting_more_and_more/)

* "China’s Banks Are Running Out of Dollars" [https://www.wsj.com/articles/chinas-banks-are-running-out-of...](https://www.wsj.com/articles/chinas-banks-are-running-out-of-dollars-11556012442)

* "China’s Economic Growth Hits 27-Year Low as Trade War Stings "[https://www.nytimes.com/2019/07/14/business/china-economy-gr...](https://www.nytimes.com/2019/07/14/business/china-economy-growth-gdp-trade-war.html)

* "China No Longer Expected to be World’s Largest Retail Market in 2019" [https://wccftech.com/china-no-longer-expected-to-be-worlds-l...](https://wccftech.com/china-no-longer-expected-to-be-worlds-largest-retail-market-in-2019/)

* "Hong Kong’s GDP grinds to near halt at dismal 0.5 per cent growth" [https://www.scmp.com/news/hong-kong/hong-kong-economy/articl...](https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3008578/hong-kongs-gdp-slows-05-cent-first-quarter-2019)

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briantakita
Looks like the Hong Kong Triads are currently attacking protesters.

[https://twitter.com/search?q=hong%20kong%20triads](https://twitter.com/search?q=hong%20kong%20triads)

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yumraj
Does anyone think that that's a bad thing? If so, why?

~~~
dodobirdlord
While books could be written about whether this is good or bad _in aggregate_
, there are certainly bad things about it. Trade is good.[0] International
investment if a form of trade.

To present an argument crafted to appeal on HN: Chinese investors not
investing necessarily means that investments have fewer buyers, the market is
less competitive, price discover is weaker, and the price of investments is
lower and more volatile. This makes it harder to get investment in a startup,
riskier and less rewarding to work at one, and increases the likelihood that
startups will fail.

[0]: [https://ustr.gov/about-us/benefits-trade](https://ustr.gov/about-
us/benefits-trade)

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api
If this deflates real estate I dont see a big problem here.

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patientplatypus
How do you say Smoot-Hawley in Mandarin again?

~~~
skunkpocalypse
it is pronounced "troll"

