China Reduces Investment in Western Economy

In the first half of 2023, China’s foreign direct investment in the world decreased by 18% compared to the results recorded in 2022 and by 25% compared to the 2016 results.

Beijing condemns the “hostile” attitude of the West towards Chinese capital.

China is investing less and less in Western companies, shifting the flow of capital to industries in Southeast Asia, Latin America, and the Middle East. According to an analysis by the American Enterprise Institute (AEI) quoted by the Wall Street Journal, “the main recipient of Chinese investment this year was Indonesia, where Beijing has long been eyeing up vast nickel resources.”

“Nickel is a key metal in the production of many types of batteries, the use of which in electric vehicles is growing at a breakneck pace. The shift in investment flows demonstrates how China is responding to worsening political relations with the USA-led West and how it is instead strengthening its commercial and financial ties with many other parts of the world. The shift of Chinese cash flows to the East and to the global South threatens to significantly reduce jobs in certain Western countries. In addition, there are concerns about the reduction of Chinese investment in Silicon Valley startups,” writes the New York newspaper.

According to AEI data, “in the first half of 2023, Chinese foreign direct investment (FDI) worldwide has fallen 18% since 2022 and 25% since 2016.” Louis Kuijs, chief Asian economist at S&P Global Ratings, told The Wall Street Journal that “the current geopolitical situation is shrinking China’s chances of investing in developed economies.” Beijing particularly condemns the “hostile” attitude of the West towards Chinese capital.

In this context, according to Kujis, “it will be difficult, almost impossible, to see a significant increase in Chinese foreign investment in the next three to five years.” According to the Wall Street Journal, Canada, Australia, and Hungary will suffer the most.

Meanwhile, Washington – at least rhetorically – is trying to defuse tensions with Beijing. On Sunday, July 23, in an interview with CNN, Secretary of State Anthony Blinken said that “the United States is working intensively on making relations between the two countries more stable, in order to create a solid foundation designed to prevent the rivalry from escalating into a real conflict.” According to Blinken who visited Beijing in June, Washington is trying to “strengthen its channels of communication” with China. “The conflict will not be in the interests of either side,” added the head of American diplomacy.