China’s overseas investment is falling just when the global economy needs it most

Chinese investment, in physical infrastructure especially, has been a key driver of global growth alongside its GDP contribution. Its decrease over the past few years is bad news for a global economy struggling to recover from Covid-19

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The central business district of Egypt’s new administrative capital, some 45km east of Cairo, is seen under construction on January 26. Egypt started the work by partnering with the China State Construction Engineering Company, as part of China's larger Belt and Road Initiative. Photo: EPA-EFE

Published: 1:30am, 15 Feb 2021Updated: 1:38am, 15 Feb 2021

China has been the main driver of world economic growth over the past decade in terms of its contribution to total global GDP, but its role as an overseas investor, in physical infrastructure especially, has gone into a sharp and rather ominous decline more recently.

Other major powers, including the US (under Donald Trump) plus Japan and some members of the European Union, have been so busy attacking China’s thrust into infrastructure-related and other overseas construction that they have overlooked how important it is to overall global growth.

This implies the severe recession into which the world as a whole (excluding China itself) has been plunged over the past year could prove even deeper and longer lasting than feared, because the China locomotive is losing steam in terms of overseas investment.

China continues to be a major driving force for the global economy on the trade front and as a buyer of commodities but the economic activity and demand created by Chinese infrastructure and other types of construction in advanced and emerging economies is waning.

Most economists agree the current recession is structural – meaning that its causes go deeper than normal cyclical downturns. But it might equally be called a “constructional” recession.

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