China is investing nine times more into Europe than it is into North America as policies force divergence, a report released this week reveals.

Chinese outbound foreign direct investment (FDI) has dramatically swung toward Europe in the first half of 2018 and its FDI into North America has dropped by a whopping 92 percent in the last year, from $24 billion to $2 billion, according to multinational law firm Baker Mackenzie.

In the first six months of the year, newly-announced Chinese mergers and acquisitions (M&A) into Europe were $20 billion compared to $2.5 billion in North America, while completed Chinese investments in Europe exceeded those in North America six-fold, at $12 billion compared to $2 billion.

Policy in both China and the U.S. is pushing this shift, as lawmakers act to protect their industries or prevent capital outflow. Amid increasing capital outflows in 2016, China tightened regulations over outward investments, cracking down on outbound FDI in the second half of that year.

Chinese firms have been divesting from North America at a rapid rate amid this tightening campaign, with $9.6 billion of completed divestitures in the first half of 2018 and another $5 billion pending, the report said. Europe also saw Chinese divestment, with some $1 billion of assets sold in that time frame and another $7 billion pending.

Meanwhile, U.S. regulators are beefing up national security investment screenings and developing a framework for stricter scrutiny of outbound technology transfer developed at home.

In a high-profile case, the Donald Trump administration placed a ban on Chinese telecoms manufacturer ZTE, enacted in response to the company violating sanctions on Iran and North Korea. But the White House lifted the ban three months later after ZTE nearly shut down, despite opposition from Congress, which has overwhelmingly deemed U.S. tech sales to the firm a national security threat.

“Policy is weighing on deal making,” said Rod Hunter, international trade partner in Baker McKenzie’s Washington, DC office. “For all the noise about CFIUS the past two years, we have recently seen more predictable reviews, and upcoming CFIUS legislation should not represent a major departure for Chinese buyers.”

CFIUS refers to the Committee on Foreign Investment in the United States, an inter-agency panel of the U.S. government tasked with reviewing the national security implications of foreign investments.

Still, he said, “It is no surprise that escalating Sino-U.S. trade disputes are impacting Chinese investments in the United States.”

Beijing and Washington are locked in a full-blown trade war, with each country currently holding tariffs over $34 billion worth of each other’s goods, and President Trump most recently threatening a new round of tariffs on $200 billion of Chinese products.

Trump cites America’s widening trade deficit with the People’s Republic as a key trigger for the conflict, while investors lament what they call China’s unfair trading practices, which include forced technology transfers, disproportionately limited market access and preferential state subsidies.

Meanwhile — and in response to Trump’s escalating trade war with the world, which has seen him impose sweeping tariffs on all foreign steel and aluminum exports without exception for close trading partners Mexico, Canada and the European Union — China and Europe have grown closer.

Beijing is working to woo Europe. In an annual meeting in Beijing, Chinese Premier Li Keqiang hosted EU leaders and stressed the need to uphold free trade and multilateralism. The joint communique issued at the meeting’s end affirmed both sides’ commitment to those principles, something they had failed to achieve in previous years.

In the statement, Beijing and Brussels submitted market access offers for the first time as part of investment treaty talks, and agreed to create a working group on WTO reforms.

While the rapid divergence in China’s outbound FDI figures is stark, it shouldn’t come as a surprise, said Thomas Gilles, chair of Baker McKenzie’s EMEA-China Group. “China is actively courting the EU with offers of reciprocal market access in an attempt to show foreign investment is not a one-way street, while trade relations with the U.S. continue firmly on a downward path.”

Still, the EU has echoed many of America’s concerns on China’s trade practices, and is working on its own national security-focused investment screening mechanism that would serve the entire bloc.

As the world’s second-largest economy, a thinning stream of money coming out of China, already showing early signs of slowing, could be largely detrimental to global growth. But Europe and other regions receiving more of it could see greater benefits.

Sweden was the top European destination for Chinese investment in the first half of 2018 with $3.6 billion, followed by the U.K. at $1.6 billion, Germany at $1.5 billion and France at $1.4 billion. Automotives, health and biotech, and consumer products and services have become the top recipients for Chinese FDI in both the U.S. and Europe.