'China Money' Leaving US and Europe... Moving to Resource-Rich Southeast Asia and South America

Decline in Western Investment Since 2016
US Down 24.8%P, Europe Down 11.8%P
Investment in 'Nickel-Rich' Indonesia and Others Rises

China money (Chinese capital) is leaving the United States and Europe and heading toward Southeast Asia, the Middle East, and South America. As the U.S. joined forces with its allies to check China, Western investments sharply decreased. Instead, attention has shifted to resource-rich countries to secure resource hegemony. This is interpreted as an intention to respond geopolitically through non-Western alliances.

On the 23rd (local time), the Wall Street Journal (WSJ), citing the United Nations (UN), reported that China's overseas direct investment (FDI) last year was $146.5 billion, down 18.1% from $178.8 billion a year earlier. Compared to 2016, when China's overseas investment peaked at $196.1 billion, it decreased by 25.3%.

The U.S.-China conflict, which began with the trade war launched by the Trump administration in 2017, has expanded into a technological hegemony competition under the current Biden administration, resulting in a significant reduction in China's investments in the West, including the U.S. and Europe. According to the American Enterprise Institute (AEI), since 2016, the share of the U.S. in China's overseas investments has decreased by 24.8 percentage points, and Europe by 11.8 percentage points. The Heritage Foundation, a U.S. think tank, reported that China's investments in the Group of Seven (G7) countries dropped from 120 deals in 2016 to 13 deals in 2022, and in terms of investment amount, from $84 billion to $7.4 billion during the same period. The share of G7 countries in China's total overseas investment also fell from half to 18%.

The WSJ stated, "Just a few years ago, Chinese investors were making major deals ranging from luxury homes and five-star hotels in New York to Swiss chemical companies and large German robotics firms," adding, "That era is now over. As Western hostility toward Chinese capital grows, Chinese investments are retreating from the West."

As the U.S. increasingly tightens its encirclement of China through semiconductor export controls and Taiwan Strait issues, this trend is expected to continue for the time being. With China's economic recovery slowing and the need to stimulate the domestic economy growing, the Chinese government is also likely to curb overseas investments. Louis Kuijs, S&P Global Asia-Pacific chief economist, explained, "The likelihood of a significant increase in China's overseas investments over the next 3 to 5 years is low," adding, "Overall, China's capacity to invest in advanced foreign economies is diminishing."

China money, having retreated from the West, is flowing into factories, mining, and energy projects in Southeast Asia, the Middle East, and South America. To minimize the impact of U.S.-led containment of China, China is strengthening alliances with other countries while laying the groundwork to secure resources that support future growth engines such as renewable energy and electric vehicles.

According to AEI data, while China reduced investments in the U.S. and Europe since 2016, investments in East Asia increased by 17.8 percentage points. Investments in the Middle East and North Africa and South America rose by 14.7 percentage points and 3.3 percentage points, respectively. In fact, the Chinese state-owned energy company China National Offshore Oil Corporation (CNOOC) invested $1.9 billion in Brazil last year. Automobile manufacturers Great Wall Motor and BYD invested in Thailand. BYD also announced plans this month to invest more than $600 million in a car factory in Brazil. Especially this year, investments in Indonesia have surged. Indonesia, rich in nickel?a key material for electric vehicle batteries?attracted 17% of China's total investments this year. Against this backdrop, China's investments in Asia, South America, and the Middle East totaled $24.5 billion last year, a 13% increase compared to the previous year.

The WSJ reported, "This shift in investment flows shows how China is responding to deteriorating relations with the West led by the U.S. and strengthening trade and investment ties with other regions."

This content was produced with the assistance of AI translation services.