Investment between the United States and China in the first half of the year dropped to the lowest level in nearly a decade amid escalating political tensions and economic fallout from the Covid-19 pandemic, a new report has found. In the first half of the year, total capital deployed through direct and venture capital investments fell to an estimated USD10.9 billion, from USD26 billion at its 2016 peak, according to the report by Rhodium Group and the non-profit National Committee on U.S.-China Relations. Moreover, a single purchase accounted for the lion’s share of the USD4.7 billion directly invested by Chinese companies into the U.S. as Tencent paid USD3.4 billion in March for a minority stake in Universal Music Group. The fall-off reflected the increasingly restrictive policies the Trump administration adopted toward Chinese investment, particularly in the tech industry, the report’s authors, Thilo Hanemann and Adam Lysenko of Rhodium, said. Venture capital investment, which largely focuses on tech-driven start-ups, was severely affected, the report found, with total Chinese investment in the U.S. falling to a six-year low of USD800 million.

The heavy headwinds Chinese investors have encountered are unlikely to let up in the second half of 2020, the authors said: policies towards China are expected to remain harsh leading up to the presidential election in November. The pressure is also unlikely to decrease even if the Democratic candidate Joe Biden defeats U.S. President Donald Trump, although a Biden administration might help reduce aggressive decoupling measures, which could help investments in non-strategic sectors like consumer goods, entertainment, health care and commercial real estate.

Direct investment by US companies in China dropped to USD4.1 billion during the first six months this year as well, although several large acquisitions are moving forward, including JP Morgan’s USD1 billion deal to take control of its Chinese mutual fund joint venture. ExxonMobil’s USD10 billion petrochemical complex and General Motor’s electric vehicle investments are both on track. U.S. venture capital investment in China totaled USD1.3 billion in the first half of the year, a notable drop in early-stage funding amid a broader slowing of tech deals and the fallout from the pandemic. China’s response to U.S. restrictions has so far been restrained, though that could change if the relationship continues to worsen. While investment activities remain anaemic, recent surveys show that American and Chinese companies continue to be committed to each other’s markets despite Trump’s stated intent to “decouple” the countries economically, the South China Morning Post reports.