China received a lower percentage of foreign investments last year than in prior years, a trend that began with former US President Donald Trump’s trade conflict with China.
The Biden administration is currently enforcing China’s so-called “phase one agreement” with the Trump administration, which was signed in early 2020.
Phase One commits China to purchase an additional USD200 billion in US agricultural, manufacturing, energy, and services exports by the end of 2021, among other things. It also commits China to progress on intellectual property rights enforcement, reducing non-tariff barriers to farm imports, and liberalizing its financial services sector.
The Biden administration could be using trade tariffs as a bargaining chip in its talks with China. There is also a political side to this, as public opinion in the United States has shifted against China, and lowering tariffs will be perceived as being weak on China.
The two nations that have profited the most are Vietnam and India, and it makes sense for them to strengthen their political and economic connections as a counterbalance to China.
Chairman of the Vietnam National Assembly Vuong Dinh Hue paid a visit to New Delhi in December to commemorate the fifth anniversary of the Vietnam-India Comprehensive Strategic Partnership. A total of 12 Memorandums of Understanding worth billions of dollars were inked to solidify the connection, spanning industries like medicines, information technology, oil and gas, and the environment.
The trade conflict between the United States and China isn’t the only thing affecting Chinese investment. Because of suspected human rights violations in Xinjiang, the erosion of Hong Kong’s autonomy, China’s zero COVID plan, supply chain concerns, and rising expenses, many international firms are leaving China.
According to Gartner, a third of supply chain leaders and US corporations planned to relocate at least some of their manufacturing out of China by 2023 in 2020. Sportswear behemoths Nike, Adidas, and Puma, as well as South Korean conglomerates Samsung and LG, are among the corporations that have relocated or are considering doing so.
India has benefited from companies looking for new areas to locate their industrial activities. Foxconn, Wistron, and Pegatron, the Apple suppliers, have factories in India. Samsung, Apple’s main competitor, has done the same. In Noida and Sriperumbudur, Samsung has developed big handset manufacturing plants.
The former is reported to be the world’s largest mobile phone factory, with a capacity of 120 million units. It is also expected to invest another USD90 million in its Noida plant before the end of the year, according to reports.
Furthermore, China’s crackdown on its top IT giants is not helping the country. These moves are most likely well-considered and calculated. This, however, has scared off investors, who have dropped Chinese stocks.
This, combined with a property market crisis sparked by troubled developer Evergrande, a slowing economy, and ongoing COVID lockdowns, has eroded investor trust in the Chinese market.
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