China | Overseas Direct Investment Pivoting to Global South

In contrast with the rebound of global FDI flow in 2021, China’s ODI failed to synchronize with the global recovery. The geographic distribution of China’s ODI is pivoting to global south countries in Latin America and Africa given that most advanced countries enhanced their regulations against fund flows from China.

Key points

• Key points:
• Global FDI flows saw an automatic rebound in 2021. However, the value added of China's foreign direct investment has failed to catch up with the global economic recovery in the same period.
• The geographical distribution of China's foreign direct investment has changed substantially in recent years. A clear trend is that it is moving towards the countries of the Global South of Latin America and Africa.
• Among the different sectors, leasing and business services, manufacturing, and wholesale and retail trade were the main destination of China's foreign direct investment, followed by the transportation, infrastructure, and high-tech sectors.
• The outlook for China's foreign direct investment remains bleak this year due to various headwinds, notably the US's monetary tightening and China's "zero COVID" policy.
• Despite the poor short-term outlook, we have good reason to be optimistic about its long-term performance.

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