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The Latin America and Caribbean (LAC) region is becoming increasingly accustomed to, and even dependent on, Chinese economic involvement. Trade continues to underpin relations between China and the region, but Chinese foreign direct investment (FDI) and public funding have slowed in recent years due to global economic headwinds and changes in Beijing’s economic and industrial policies. There is. This report is based on several statistical sources, the author’s analysis of individual FDI transactions, and consultations with top industry experts in LAC, and shows that Chinese FDI in the region is at a time of major transformation for both China and the country. It highlights various trends underway in the world. region.
Key findings:
- Data on Chinese FDI in the LAC region shows a noticeable downward trend in project announcements over the past few years. This indicates that the value of greenfield FDI projects has declined over time, and the value of Chinese mergers and acquisitions (M&A) in the region has declined more markedly.
- The recent decline in Chinese FDI to the LAC is due to a number of factors, but is at least partly related to the ongoing realignment of investment priorities on the part of the Chinese government and Chinese companies. Chinese companies often more Engagement with the LAC is, on average, through small-scale transactions and in frontier areas that align directly with the Chinese government’s own economic growth goals.
- Indeed, our data show a clear shift in FDI from China to specific industries in the LAC. Many of these new priority areas are described by China as “new infrastructure” (xinjijian). The term encompasses industries broadly related to innovation, but also important to China, such as telecommunications, fintech, and energy transition, for example. Unique economic growth strategy. These are among the areas that many G7 countries themselves have sought to prioritize in the LAC and other regions of the Global South.
- FDI from China in these industries is increasing, both in value and number of deals.accounting for more than 60% (approximately $3.7 billion) of China’s total annual FDI in the region in 2022, and more than 60% of the total FDI transactions announced by Chinese companies in the same year.
- Chinese investors also continue to focus on traditional areas of interest, such as those related to China’s own food and energy security. While some of these still represent a significant portion of overall investment, investment in these areas is also changing in a manner consistent with China’s increased focus on innovation.
- In general, large-scale infrastructure projects of the kind that once characterized Chinese President Xi Jinping’s signature foreign policy, the Belt and Road Initiative (BRI), no longer represent as much of China’s investment in the LAC as they once did. It is no longer. In many parts of the region, China’s interests in canals, railways, and other key transport and energy infrastructure are increasingly focused on innovation, whether in information and communications technology (ICT), renewable energy, or other emerging industries. I’m leaving it there. The Chinese government focuses on its own economic development and global competitiveness.
Download the report here:
Read the methodological notes here:
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