Pandemic, Strained U.S. China Relations Force Investors to Pivot

Tensions between the U.S. and China — the world's two largest economies — and the pandemic are making U.S. investors rethink supply chains once largely dependent on Asia.

That's one of the takeaways from a virtual panel hosted Thursday by the Asia Society Southern California and dot.LA on venture capital in Southern California and Asia.

"Only 63% of U.S. manufacturing is fully utilized," said Eric Manlunas, founder and managing partner of Wavemaker Partners. His firm has recently invested in companies that are helping bring manufacturing back to the United States, after years of offshoring.

Especially during the pandemic, many want to become less reliant on Asian supply chains, he said. "All the saber-rattling Trump has done has created some need for some of these large product suppliers and manufacturers to start looking into on-shoring a lot to the U.S."

Investors are closely watching the strained trade relations between the U.S. and China, from the Trump Administration's ban on TikTok to the recent export restrictions targeting state-owned enterprises.

Many are betting tensions will all blow over soon and not have an overall chilling effect.

"This will subside. Americans have very, very shallow memories and this will be forgotten pretty quickly," Manlunas said.

Chinese investment has flourished in Los Angeles. Companies like Baidu, Tencent, Alibaba and Wanda Group are putting money behind startups that want a toehold in the Asian market.

Wavemaker Partners, co-headquartered in Santa Monica and Singapore, announced last month it would close its third and largest fund focused on Southeast Asia.