That said, the Covid-related slowdown in China has had an impact in this regard, as have political shifts. How much relocation and reshoring of foreign companies are you seeing in China? If China is falling further and further behind the US on the tech side, particularly around the military, and the US is selling much more strongly into Taiwan, suddenly it is better to go harder earlier, rather than wait. What we are seeing is that China has always thought that time was on its side with regards to Taiwan: the longer it waits, the stronger the Chinese economy and military gets, so why rush, basically? This logic could flip with tech decoupling. Yes, the Chinese economy will grow at around 4% a year for the next five years, which is decent, but the lack of access to the most advanced technology will hurt the economy as a whole, as well as its military – and this is where Taiwan comes in. The geopolitical implications here are very significant in terms of hardware.Īs this trend progresses, it will get much harder for China to innovate and keep up with the West economically. Now we appear to be at the early stages of some hardware decoupling, and this time it is Biden that is leading it, following in Donald Trump’s footsteps, albeit in a way that is increasingly systematised, especially with regards to advanced semiconductors.
#China stuf software
China firmly hammered that jello to the wall and created the Great Firewall, which led to the internet and a lot of software decoupling. Bill Clinton famously said that trying to control the internet is like trying to nail jello to the wall. The internet and, to a lesser degree, software decoupling, which has been led by China.
Where are you seeing the most economic decoupling? China’s reaction to this, as has been its policy for years, is to roll out the red carpet even more so as to pull in more foreign capital, especially more foreign IP technology ( as they have done with Tesla, and some of the big German chemical companies) before Biden puts the hammer down and starts to cut it off from the US side. Under Xi Jinping there has always been a focus on technology upgrading and securing natural resources, but at the most recent Party Congress it really got taken up a notch, not least after Joe Biden’s statement that he wanted to slow China’s technology development, which is effectively a declaration of war. So this is where we will see the most Chinese outbound FDI. These are the two, by far, most dominant state-backed areas where we will see a lot of the political capital, both in terms of direction from Beijing but also state-sponsored enterprises. View all Despite this slowdown, where is China looking to invest the most?Ĭommodities (particularly those related to the energy transition) and in tech and intellectual property (IP) acquisitions. We are seeing these trends starting to emerge much more strongly in the 2022 data, and these are going to run on for the next decade. Number two is the impact of geopolitical rifts with the West, which is restricting where China can invest in the US, Europe and elsewhere. Number one is a pullback of Belt and Road Initiative-related investment and lending. There are a couple of interesting trends that have been around a while that are now becoming more pronounced. Meanwhile, moving money out of China has also been in slowdown. The headline numbers show growth of 15%, which sounds pretty good on the face of it, but most of that was just companies keeping profits in China, not new FDI. A lot of the stuff that they classified as FDI was basically retained profits or retained earnings.
Last year was a slow one for China in terms of inbound FDI. How did investment into and out of China shape up in 2022? Rory Green, chief China economist at macroeconomic forecasting consultancy TS Lombard, sat down with Investment Monitor to talk about the company’s 2023 predictions and analysis, with an emphasis on foreign direct investment (FDI). (Photo by Paul Yeung/Bloomberg via Getty Images) Xi Jinping, China’s president, faces many headwinds in 2023 as the country attempts to emerge from its Covid coma.
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