How to get FDI up 10 times
Business Standard|September 16, 2024
Xi Jinping came to power in China in 2013, and brought a new emphasis on arbitrary state power and nationalism.
AJAY SHAH
How to get FDI up 10 times

This disrupted the "China model" for making progress towards greater prosperity and greater freedom. Many economic indicators show how the China model was derailed from 2017 onwards. Net foreign direct investment (FDI) in China was $291 billion in 2013. In the latest data, for 2023, it was $43 billion. On September 12, Eleanor Olcott and Wang Xueqiao had an article in the Financial Times, in which they described "How China has 'throttled' its private sector". One indicator they show is the pace of venture capital-funded company creation. It went down from the peak of 51,032 in 2018 to 1,202 in 2023. That's a decline of 97.6 per cent: One vibrant field was essentially extinguished.

Under normal circumstances, once China-centric production arrangements are established at a global firm, change can take place only at a glacial pace because no leadership wants to rock the boat of well-debugged production arrangements. Even when Chinese wages rose, relatively little activity moved out of China through this sensible conservatism of firms. Once the Chinese state lurched into arbitrary state power and nationalism, this triggered a rethink. Most global corporations realised that they were under-diversified. A unique moment arose, where many global firms started shifting activities away from China. The phenomenon of global firms redesigning their production arrangements is a megatrend of the 2018-28 period.

This story is from the September 16, 2024 edition of Business Standard.

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This story is from the September 16, 2024 edition of Business Standard.

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