Chinese investors flock to emerging markets

China money, which has made aggressive investments in the U.S. and Europe over the last decade, is diminishing. Global funds that had invested in China in hopes of development potential are also leaving China. Experts say that intensifying conflict between the U.S. and China has resulted in a reluctance to invest in each other, leading to a minus-sum situation for both countries.

The Wall Street Journal reported on Sunday that China’s foreign direct investment (FDI) dropped to 147 billion dollars, an 18% decline from the previous year. It declined by 25% compared to 2016, when investment levels reached record high levels of 196.1 billion dollars.

Chinese capital flight was noticeable in Western countries, including the U.S. and Europe. According to the U.S. think tanks AEI and the Heritage Foundation, there were 120 M&As led by Chinese companies in G7 countries in 2016, but this year the figure capped at only 13. In the same year, 84 billion dollars, or 42.8% of total overseas investment, was concentrated in G7 countries, but investment volume in 2022 was only 7.4 billion dollars, or 18% of the value.

Instead, China is turning to emerging markets such as Southeast Asia, the Middle East, and Africa, paying attention not only to the potential of consumption but rich resources in future industries such as renewable energy or electric car batteries. “China is spending money on building new factories in Southeast Asia or acquiring mines in South America, which appears to be an attempt to acquire access to key resources (such as rare metals) by strengthening bonds with emerging countries,” reported the WSJ.

Western investment is also turning its back on China. According to the Commerce Department in China, foreign direct investment to China in Q1 2023 recorded 20 billion dollars, which is only one fifth of 100 billion invested in the same period last year. Despite the Chinese government’s efforts to attract foreign capital by designating 2023 as the year for investing in China, FDI in the second quarter also declined by 2.6% compared to the same period last year.


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