How big a problem is the falloff in Chinese investment?

According to President Trump, decoupling the U.S. economy from China's is all about getting Americans more jobs. But that sword can cut both ways: Just like U.S. investors can pull their money out of China, Chinese investors can pull their money out of the U.S. In fact, Chinese money flowing into American businesses and factories has fallen almost 90 percent since the Trump administration kicked off.

Does this mean trying to put some economic distance between the U.S. and China is a bad idea? Not necessarily. But it does suggest that we may have to rethink some other aspects of our economy to make things work.

For a while, the amount of money Chinese investors were pumping into economic projects in the U.S. went up. Foreign direct investment into America from China jumped from $15 billion in 2015 to $46.5 billion in 2016. By 2017, Chinese-owned companies were supplying 140,000 jobs to Americans — a nine-fold increase over 2009. Then, about halfway through 2018, the tide reversed dramatically. By the end of the year, Chinese foreign direct investment in the U.S. was a mere $5.4 billion — a drop of 88 percent from the 2016 peak. And the decline has been felt across the economy.

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Trump's trade war is not solely responsible for choking off that investment. For one thing, China's own economy is slowing down, and the government there recently instituted stricter capital controls — making it harder for Chinese investors to remove their money from the country — to keep better control over its own domestic economic policy.

But the trade war has definitely had an effect. The tit-for-tat tariffs from both countries are upending supply chains, making it less profitable for Chinese investors to open up or maintain parts of those supply chains here. The Committee on Foreign Investment in the United States, tasked with scrutinizing foreign investment here for security concerns and other issues, recently gained expanded oversight powers, and has been cracking down on more deals involving China. Major politicians on both sides of the aisle are also lobbying American companies to be more wary of accepting Chinese investment, again for security reasons.

More generally, the political environment created by Trump's trade war has simply made Chinese investors feel less welcomed. "The U.S. doesn't trust the Chinese, and China doesn't trust the U.S.," Eswar Prasad, the former head of the International Monetary Fund's China division, told the New York Times.

Exactly how much of a problem is this? Well, Chinese investment actually remains a fraction of all foreign direct investment (FDI) to America. All of Asia and the Pacific region — not just China — accounted for only 17 percent of FDI in 2017. China's contribution is absolutely swamped by the money coming in from European countries. We'll need to get the 2018 and 2019 investment data, which won't be available for a while, to know for sure. But at the aggregate level of the national economy, it seems unlikely the exodus of Chinese investment will matter much.

But if you break down the analysis to more specific considerations, from industry to industry and from locality to locality, matters get more complicated. As the U.S. has been hit hard by deindustrialization and rising inequality, more and more economic activity has clustered in the country's major city centers. Chinese investment has been one force that has kept at least some jobs afloat in the areas that were left behind by that shift.

Old automobile factories in Michigan have been snapped up and refurbished thanks to the influx of Chinese money, which now supports over 10,000 jobs in the state — unless the Chinese pullback threatens that employment. In South Carolina, Chinese investors have opened everything from a fiberglass factory to a yarn-spinning operation, and anecdotal reports from both suggest they'd be employing hundreds more people than they do if not for the recent souring in trade relations. In Kentucky, it was a paper mill that reopened thanks to Chinese investment.

The problem here is really America's own devotion to a strict market economy, in which jobs are created through investment by private actors — and in which those private actors can move around their money as they will, according to their own particular needs. If China's investors decide to abandon these specific places and projects, there's no guarantee other investors will feel the need to step in. That may not threaten the national economy, but it will further exacerbate the America's regional inequality.

This does not necessarily mean Chinese investors specifically should be wooed back. The trade war involves at least some legitimate national security concerns. American workers also sometimes report that Chinese-owned businesses can be more draconian, paying less and demanding longer hours with more dangerous working conditions.

But it does mean that if we want to plug the hole left by Chinese investors, America will likely need to step outside of its market-driven framework. There are different ways we could do that.

We could resurrect some sort of planned and coherent national industrial policy: protect specific places and industries with well-aimed tariffs or subsidies, while encouraging new development with federally funded research. We could either expand federal spending or reform Federal Reserve policy to better backstop state and local budgets, so they can concentrate more on public investment, and less on gutting their own local economies to balance their books. Public funding could expand higher education institutions throughout these places, giving new industries more of a foothold. The federal government could also get more directly involved in hiring and investment, through public works projects or something like a Green New Deal.

America decoupling itself from China economically may or may not be for the best. But if we do it, there will be costs. And addressing those costs will likely require us to think outside the market-driven box.