As China’s economy slows and its stock market takes an eye-popping dive, the issue of Chinese investment abroad has become all the more fraught. In a recent interview with Spain’s El País, Brookings Vice President and Director of the Foreign Policy program Bruce Jones discussed China’s investments around the world and its strategies for pursuing them.
One of China’s priorities is to improve its relations with Europe. In spite Europe’s current moment of economic weakness, Chinese leaders recognize that the European Union is still the biggest market in the world. Chinese investors will continue to turn to emerging countries in Africa and Latin America for the primary materials it needs to support its massive manufacturing sector, but are increasingly drawn to Europe’s well-managed, high-tech companies and low level of political risk. An added advantage of doing business in Europe is that it is not a strategic rival like the United States is, Jones noted.
Alongside China’s growing interest in the more sophisticated European market, however, there remains a need for enormous quantities of energy. Even if there were a major revolution in the use of renewable sources (a scenario Jones sees as unlikely), energy supplies will remain a major challenge for China. It will have a choice to pursue a mix of sources of hydrocarbons around the world. Chinese leaders are thus attempting to strike a tricky balance: simultaneously encouraging innovation—which requires big investments and technology acquisition from Europe and the United States—while maintaining massive energy flows.
What makes China’s investment strategies controversial for many countries is that they don’t always appear well-intentioned. China has human rights problems at home and is engaged in worrisome expansionism in Central Asia and the South China Sea. “It worries me,” Jones said, “that Europe, especially in these times of economic crisis, looks to China in search of investments and won’t be able to see the problems that lie behind.”
In Latin America, which has been a privileged destination for Chinese investments in recent decades, the Chinese footprint will likely diminish but not disappear. In spite of setbacks—in Venezuela, for example—there are new opportunities for China in the region. The thaw in Cuba, in particular, may create new investment opportunities for Chinese companies; while U.S. companies tend to be reticent to work in countries without reliable rule of law, Chinese companies are more accustomed to such environments. Brazil, meanwhile, is a priority relationship for China among the BRICS (Brazil, Russia, India, China, and South Africa) group—but it’s not clear that the Brazilians feel the same. According to Jones, “They’ve seen that the Chinese do nothing for their interests.”
Tip on the tightrope
Finally, Jones cautioned against reading internal Chinese politics as a monolith. There is a fundamental division between those who believe that confrontation with Japan and the United States is inevitable, and those (including primarily the business community), that think such confrontations would be a tremendous mistake. Jones’ own assessment is that President Xi Jinping has managed to consolidate his power among both groups. The somewhat bizarre result is that China is engaging in a military buildup while at the same time trying to sign an investment agreement with the United States. It’s not yet clear whether he will be able to sustain such a delicate balance.
Globally, the most important challenge that continues to bedevil China is its limited capacity to respond—diplomatically, militarily, or otherwise—to events overseas that threaten Chinese interests. Without these tools, and facing an array of internal changes as well as external risks, the next 20 years will be an interesting—and likely rocky—era for China.